Fuel Prices Remain Unchanged to Protect People's Purchasing Power, Especially the Middle Class
An energy economics observer from Universitas Gadjah Mada (UGM), Fahmy Radhi, views the government’s decision not to increase the prices of fuel oil (BBM) as a measure to safeguard public purchasing power amid current global economic pressures. The government is seen as taking a cautious approach to policy-making, considering its broad impacts.
“If not increased, the burden on the state budget (APBN) is quite heavy, but if raised, it will ignite inflation, reduce purchasing power (of the public), and so on. I think not raising either subsidised or non-subsidised BBM is the right decision,” he said on Tuesday (31/3).
A fuel price hike, he added, has the potential to trigger inflation. Meanwhile, household consumption serves as one of the main pillars of national economic growth.
He further noted that public purchasing power, especially among the middle class, has been under pressure. Therefore, economic balance is needed, along with providing space for gradual public recovery.
“Purchasing power of the middle class has been continuously declining. If added to by increases in subsidised or non-subsidised BBM prices, their purchasing power will be further eroded,” he stated.
The decision not to raise BBM prices can have a positive effect on price stability. Declining public purchasing power, according to him, could endanger Indonesia’s economy.
He assessed that there is an opportunity for the government to strengthen fiscal management, namely by maintaining national energy subsidies.
The government, he continued, can optimise APBN management strategies, including adjusting oil price assumptions to be more adaptive to current global market developments.
To maintain fiscal balance, innovative steps are required, such as budget reallocations, which could serve as a solution to strengthen energy subsidies while ensuring that various priority programmes continue to run effectively and provide broad benefits to the Indonesian public.
“But in my view, to cover (the APBN) by reallocating budgets that have already been allocated (from other programmes),” he concluded.