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Thursday 28 March 2013

[wanita-muslimah] Editorial: A Big Price Will Be Paid for Inaction on Fuel Subsidies

13:15  BUDI WIBOWO  No comments

 

Editorial: A Big Price Will Be Paid for Inaction on Fuel Subsidies
Jakarta Globe | March 28, 2013

n a year of highly charged political debate, eliminating fuel subsidies would be suicidal for the government — but not doing anything to reduce the cost of the subsidies will be financial suicide. The government, it seems, is stuck between a rock and a hard place.

It is widely acknowledged that fuel subsidies are draining the state budget and hampering the government's ability to spend on infrastructure and other more economically beneficial programs. This year alone, the government has allocated $30 billion for fuel subsidies, and this figure may grow.

The need to reduce this huge burden is urgent. Understandably, the government has certain constraints when it comes to eliminating the fuel subsidies, but as the National Economic Committee (KEN) has suggested, there are steps that can be taken to mitigate the impact of the subsidies on the state budget and the overall economy.

One step could save billions of dollars and help spur economic growth without any political fallout. The government can instantly restrict private car owners from using subsidized fuel, using the savings to fund poverty-reduction programs and direct cash transfers to poor households.

If fuel subsidies are reduced and the saved money used to provide jobs for 100 million people, their expanded purchasing power would boost the economy, KEN says. This makes sense and the government should seriously consider the proposal.

It would be damaging to allow the cost of fuel subsidies to balloon out of control. The impact on the economy and Indonesia's credit rating could be disastrous, causing the rupiah to tumble. The specter of the twin deficits — the budget and current account — growing out of control has already spooked investors, making the rupiah one of the worst performing currencies in Asia this past year.
Time is not on the government's side. The sooner it acts, the better for the economy and the Indonesian peopl

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