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Govt readies budget as inflation 'shock absorber'
The government is shifting its budget policy away from COVID-19 relief.
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A woman carries a bag of produce at a market in Bekasi on Aug. 11, 2021. (AFP/Rezas )
T
he government is preparing the state budget as a ‘shock absorber’ for rising inflation to maintain domestic purchasing power in order to keep Indonesia's economic recovery on track.
Finance Ministry Fiscal Policy Agency (BKF) head Febrio Kacaribu said on Friday that the government would increase spending on energy subsidies to accommodate rising global energy prices and greater domestic demand.
He did not say how much more money would be allocated for energy subsidies, but noted that the amount would depend on how long energy prices remained high.
"Before this, our budget focus was maintaining the health of our people, but now that this year's pandemic situation has become much better, we divert our focus to maintain the health of the people's purchasing power," Febrio added.
The state budget previously focused on funding COVID-19 relief programs such as medical worker incentives, death compensations, vaccine procurement and hospital and healthcare facility funding.
The shift in budgetary policy comes as Indonesia posted record-high inflation rates in the past few months due to surging global commodity prices following the war in Ukraine, economic sanctions against Russia and global supply chain disruptions.
Inflation rose to a 33-month high of 3.47 percent in April after posting a 22-month high of 2.64 percent in the preceding month, according to Statistics Indonesia (BPS). The figures still fall within Bank Indonesia’s target range of 2 to 4 percent.
