Govt trims subsidy expenditure in 2012

The government has downsized its budget allocation subsidies in its proposed 2012 state budget that was presented by President Susilo Bambang Yudhoyono to legislators on Tuesday.

Under the proposed budget, subsidies are expected to reach Rp 208.9 trillion, a Rp 28.3 trillion decrease from the Rp 237.2 trillion in the revised 2011 state budget, the President said in his annual economic address.

Of the total subsidies, Rp 123.6 trillion will be alloccated for fuel subsidy and Rp 45 trillion for electricity subsidy. The remaining Rp 40.3 trillion will be allocated for non-energy subsidies, including food, fertilizer, social services and taxes, among others.

“The government realizes that subsidies are actually designated for people with weak or low economic standing, but their disbursement is not targeted well, so they are also enjoyed by those who are economically [well off],” Yudhoyono said.

“Therefore, the reorganization of subsidy-disbursement policy that has been done in 2011 will continue to be implemented in 2012.”

Economists have warned that mounting subsidy costs will hinder Indonesia’s economic potential and have recommended the government reallocate its funds toward development or a social safety net instead.