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View all search resultsNo detailed talks yet on fuel subsidy
As the economic team kicked off its work on Monday, the avidly followed issue of the new administration's plan to reduce the state budget-straining fuel subsidies remained under the spotlight
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s the economic team kicked off its work on Monday, the avidly followed issue of the new administration's plan to reduce the state budget-straining fuel subsidies remained under the spotlight.
But still no word had yet been issued about the plan for cutting the Rp 291 trillion (US$24 billion) fuel subsidies that account for 15 percent of next year's overall state spending, despite reiteration of the commitment to do so, following the new administration's first Cabinet meeting led by President Joko 'Jokowi' Widodo.
Instead, during the Cabinet's first days, the new Coordinating Economic Minister Sofyan Djalil was told by the President to streamline regulations among the 10 ministries that it supervised, while Finance Minister Bambang Brodjonegoro was similarly told to make budget allocations to ministries more efficient.
Jokowi's administration is challenged by limited fiscal elbow-room as most of the state spending has already been allocated to cover regular ministerial expenses. Analysts have said that little could be done to save the state budget from deteriorating, except by reducing the significant amount spent on the fuel subsidies that have benefited the well-off, instead of being channeled into more productive spending, such as on infrastructure or through social spending projects to those in need.
'We are hoping for fresh policies, either new control systems [over fuel subsidies] or something else that's new,' said Andi Sommeng, chief of the Downstream Oil and Gas Regulatory Agency (BPH Migas).
State oil company PT Pertamina, which distributes the subsidized fuel, tried limiting supply of it earlier this year, but public panic-buying prompted the company to reverse its course. With subsidized fuel currently selling at Rp 6,000 per liter, compared with the regular market price of about Rp 11,000 per liter.
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I Kadek Dian Sutrisna Artha, the director of the Institute of Economic and Social Research (LPEM) at the Faculty of Economics, University of Indonesia, said that lowering fuel subsidies would be the main challenge faced by the Coordinating Economic Ministry, as well as by the Coordinating Maritime Affairs Ministry, which under the new administration has taken over supervision of the Energy and Mineral Resources Ministry.
'It must coordinate with related ministries in an effort to push down the inflationary effects that will ensue after the price hike. That is when its performance will be put to the test,' he said.
On the country's potential to expand its gross domestic product (GDP) by 7 percent, Finance Minister Bambang said the target would be feasible if the administration was able to fix its economic foundations, whether in the fiscal, monetary or real sectors.
'That is also why the President wants us to cut down on complicated bureaucratic measures,' Bambang said. One of the examples is the promotional expenses for tourism that are scattered across several ministries. 'That reduces the effectiveness of the promotion itself. So the President has asked us to integrate such expenses,' he added.
Consolidating expenses and spending efficiencies among the economic ministries seemed to be Jokowi's focus during Monday's Cabinet meeting, as reflected in Sofyan's comments.
'We want to carry out the vision and mission that the President has promoted, so we have to solve bureaucracy-related problems to be able to spur economic growth,' he said on Monday after a hand-over ceremony at his office.
