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Swelling fuel subsidy complicates fiscal consolidation
The government is considering desperate measures to control the flow of the fuel subsidy, over fears that it may cost more than has been allocated, adding pressure to the state budget amid fiscal consolidation.
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An attendant waits for a customer at a fuel station in Surakarta, Central Java. (JP/Ganug Nugroho Adi)
T
he government is considering desperate measures to control the flow of the fuel subsidy over fears that it may cost more than has been allocated in the state budget, adding pressure amid the fiscal consolidation.
Finance Minister Sri Mulyani Indrawati said on Wednesday that the government had upped the subsidy to Rp 502 trillion (US$34.2 billion), from previously around Rp 150 trillion, in a bid to keep subsidized fuel and electricity affordable amid surging commodity prices.
The Rp 502 trillion, however, was set to provide a quota of only 23 million kiloliter of Pertalite, Pertamina’s subsidized RON-90 fuel, whereas the current rate of consumption may lead the public to consume 28 million kl this year.
“Our budget only covers 23 million kl. This means that there will be an additional [subsidy] on top of the Rp 502 trillion that we have conveyed,” Sri Mulyani told reporters after a meeting with State-Owned Enterprises (SOEs) Minister Erick Thohir and Energy and Mineral Resources Minister (ESDM) Arifin Tasrif.
“That’s why I hoped Pertamina would really control the volume [of Pertalite sold],” she added.
Read also: 2022 deficit to drop below 4% despite subsidy hike: Govt
The Finance Ministry’s Budget Director General Isa Rachmatarwata said on Thursday that the government would continue monitoring the situation with a close eye, as several indicators were showing worrying signs about the state of the fuel subsidy.
