"Any rise of Rp1,000 per liter will contribute 1-1.5 percent to the inflation rate at the end of 2014. So if the price of subsidized fuel is raised by Rp3,000 per liter, it will contribute 3-4.5 percent to the inflation rate," he said here on Friday.
Mirza noted that if the price of subsidized fuel is raised by Rp3,000 per liter, the total inflation rate for all of 2014 will reach 4.5 percent plus 3-4.5 percent, or 7.4-8.9 percent.
However, he added, the inflation rate can be kept down by setting the selling price of subsidized fuels according to the international price without scrapping subsidies.
For instance, if the international price of non-subsidized pertamax gasoline is Rp11,500 per liter, while the subsidy remains at Rp2,500 per liter, the selling price will be Rp9,000 a liter, he said.
"But if the global oil price increases to Rp12,000 per liter, the selling price must be raised to Rp9,500 a liter," he said.
Indonesia once applied this scheme, but later abandoned it, he said.
"The scheme only lasted for one to one-and-a-half years. It was cancelled because it burdened the nation. If there is a fixed subsidy, the inflation rate will be more manageable. The inflation rate will worsen if a full subsidy is applied and later revoked," he said.(*)
Editor: Heru Purwanto
Copyright © ANTARA 2014
