The policy to increase the price of subsidized Pertalite and diesel is the right one
Jakarta (ANTARA) - The government’s efforts to adjust the price of subsidized fuel oil (BBM) are appropriate in the midst of relatively high world oil prices, an observer of political economy policy has said.

"The policy to increase the price of subsidized Pertalite and diesel is the right one. There are two main reasons, the first is because the oil price is relatively high when compared to the macroeconomic assumptions in the 2022 State Budget. Although the current trend of world oil prices tends to decline, the price is still higher than what was budgeted in spending," Reyhan Noor from the Indonesian Laboratory 45 (LAB 45) research institute said when contacted here on Monday.

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The second reason is that substantial subsidy funds for fuel can be diverted to continue the agenda of structural economic transformation, he added.

Noor said he believes that the main obstacle to distributing fuel subsidies has always been their low effectiveness in helping people who really need it.

To maintain prosperity amid volatile conditions, it would be better to distribute subsidized fuel funds directly to people in need, he added.

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Fuel direct cash assistance (BLT) would seem to have a higher effectiveness than subsidies for fuel, he said. Meanwhile, the relatively large energy subsidy and compensation budget this year have a trade-off linked to the agenda of structural economic transformation.

With a budget of Rp650 trillion, the government can carry out many policy agendas for structural economic transformation.

Citing an example, he said that the value of the budget is at least equivalent to more than one thousand times the budget for the construction of state-owned goods (BMN) for new and renewable energy (EBT) infrastructure in 2022 of Rp483 billion.

The budget is large enough to at least help the government accelerate other targets of the economic structural transformation agenda.

Hence, an increase in subsidized fuel prices could actually increase the government's ability to allocate the budget for more useful agendas to achieve sustainable development, Noor emphasized.

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Translator: Katriana
Editor: Fardah Assegaf
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