Regarding the subsidies, there was no choice; we had to do it
Jakarta (ANTARA) - Coordinating Minister for Maritime Affairs and Investment Luhut Binsar Pandjaitan stated that the government's choice to reduce fuel subsidies is expected to make Indonesia's economy stronger.

"Regarding the subsidies, there was no choice; we had to do it. If we do it, I think it will make Indonesia's economy stronger in the future because the subsidies are getting less and less," the minister stated during a Focus Group Discussion (FGD) on Undersea Cable Investment in Indonesia that was monitored online here on Wednesday.

According to Pandjaitan, the reduced subsidy burden will be better for state finance. He also said that the smaller the subsidies released to the market mechanism, the better it will be.

"However, it is impossible for us to be purely a 100-percent market mechanism because we must still provide subsidies to our low-income people, but subsidies that are right on target," he remarked.

The minister further highlighted that Indonesia's economic performance is still one of the best amid pressures experienced by the world. Indonesia's inflation rate in August 2022 stood at 4.69 percent (YoY), which is deemed quite good as compared to other countries, such as Russia, at 15 percent, or the US, at 8.5 percent.

Likewise, Indonesia's economic growth is still at 5.44 percent in the second quarter of 2022. This figure is considered to be an indicator of fast and robust economic recovery after the pandemic.

The minister admitted that the structure of transportation costs is among the highest in terms of figures, especially with the increase in fuel prices.

However, he expressed optimism that the government's policy to provide social assistance diverted from fuel subsidies, whose funds are already available in regional governments, will be able to suppress inflation in the transportation sector.

Earlier, the government, on Saturday, September 3, raised the price of subsidized Pertalite fuel, from Rp7,650 per liter to Rp10 thousand per liter; subsidized diesel, from Rp5,150 per liter to Rp6,800 per liter; and non-subsidized Pertamax, from Rp12,500 to Rp14,500 per liter.

This increase was applied since the government shifted the fuel subsidies to social assistance on account of the fact that the number of energy subsidies and compensation taken from the state budget had reached Rp502.4 trillion, including energy subsidies of Rp208.9 trillion and energy compensation of Rp293.5 trillion.

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Translator: Ade Irma, Raka Adji
Editor: Sri Haryati
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