Govt to disburse Rp 4.8t for poor

Rendi A. Witular, The Jakarta Post, Jakarta

The government will disburse Rp 4.8 trillion (US$470 million) in low-income assistance funds this year to lighten the burden of the poor once the government reduces the fuel subsidy and thereby increases fuel prices.

Under the new scheme, poor people with an individual monthly income of Rp 175,000 or less will receive Rp 100,000 per month in assistance funds.

Minister of Communications and Information Sofyan Djalil said in a post-Cabinet meeting media conference on Friday that the new scheme had been approved in the meeting and that the government was now more than ready to raise fuel prices.

"Aside from the existing 'indirect subsidy' (education and health funding), the government will also provide 'direct subsidies' by transferring money to poor people registered with the Central Statistics Agency (BPS)," he said.

The assistance funds for the poor is aimed at mitigating the effects of the resulting surge in inflation following the fuel subsidy cut.

Sofyan said the latest BPS figures revealed there were 15.5 million households, or 62 million people, living slightly above, on and below the poverty line. They are eligible for the funds.

Each eligible recipient will be issued a BPS registration card that will entitle them to collect assistance money every three months at post offices and Bank Rakyat Indonesia (BRI) branches.

"We believe there will be some problems in the early stages of the scheme's implementation but we will evaluate the system quarterly to improve its effectiveness," said Sofyan, adding that the system would soon be discussed with the House of Representatives.

He said the assistance funds would go hand-in-hand with assistance for education and health services for the poor as well as rural infrastructure development, which has been earmarked at Rp 17.8 trillion this year.

The education and health care assistance is a result of the fuel subsidy cut in March, which led to an average 29 percent increase in domestic fuel prices.

Since the administration of president Soeharto, low-income assistance funds have always been in the form of non-monetary assistance such as subsidized rice, projects in the fields of education, health and rural infrastructure.

Such schemes have been deemed ineffective since it was possible for central government and regional administration officials to embezzle funds.

Sofyan emphasized that the assistance funds would contain fewer moral hazards as only poor people would have BPS cards entitling them to cash aid.

Distribution of the BPS cards, on the other hand, will be closely supervised by the government to avoid the number of poor people being inflated.

The government faces the daunting task of raising fuel prices in the near future in an effort to slash the ballooning cost of the fuel subsidy that burdens the state budget. Surging global oil prices are hovering above US$65 per barrel, which increases the government cost of subsidizing imported fuel.

Based on recent figures from state oil and gas firm Pertamina, the fuel subsidy is estimated to cost Rp 119.4 trillion this year.

The skyrocketing cost of the subsidy has not only disrupted the country's fiscal balance but also monetary stability, with the rupiah steadily declining to more than Rp 10,000 against the U.S. dollar over the past couple of weeks.