Anticipating Impact of Rising Prices on Vulnerable Groups
The increase in the prices of basic needs, has added to the economic burden of people who have not fully recovered from the Covid-19 pandemic. The government needs to pay more attention to vulnerable groups.
Residents queue to buy cooking oil at a price of Rp. 14,000 per liter at the Pesanggrahan Police Sector, South Jakarta, Friday (4/3/2022). The cheap cooking oil market will last until Sunday (6/3/2022). Each resident can only buy a maximum of four liters..
JAKARTA, KOMPAS – The prices of crude oil and a number of food commodities have soared to new record highs amid the growing global uncertainty due to the Russia-Ukraine conflict. The global price surge has also affected Indonesia, as reflected in the increased prices of liquefied petroleum gas (LPG), gasoline, cooking oil, soybean, wheat, beef, and sugar.
With regard to the issue, Vice President Ma'ruf Amin said on Tuesday (8/3/2022) that the government needed to establish a price control mechanism and make a concerted effort to ensure the availability of food in the country.
The executive director of the Center of Reform on Economics Indonesia, Mohammad Faisal, said that the conflict between Ukraine and Russia had a direct and indirect impact on commodity prices, particularly fuel oil (BBM) and wheat.
The price of Brent crude oil, for example, has reached US$130 per barrel. The increase in the crude oil price has also pushed up fuel prices in Indonesia. At the same time, the prices of several food commodities have also increased.
"Inflation is now in sight and needs to be anticipated," said Faisal.
The global food price index, according to data released last Friday by the Food and Agriculture Organization (FAO), has reached an all-time high, mainly due to an increase in the prices of vegetable oils, grains, milk, and meat. The food price index reached 140.7, higher than the previous record of 137.6 in February 2011.
Global crude palm oil (CPO) prices also surged as demand continued to increase amid a decline in supply from major producers, including Indonesia, the world's leading producer of CPO. Meanwhile, soybean prices continued to increase in line with an expected decline in soybean production in South America.
The grains price index also increased, partly due to the increase in wheat prices triggered by the conflict between Ukraine and Russia, the world's major exporters of wheat. The meat price index also hit a record high, mainly driven by strong demand amid tight beef supplies from Brazil and repopulation policies in Australia.
Kompas/Priyombodo
Jahidin (48), a micro, small and medium enterprise (MSME) actor, uses 12 kilograms (kg) non-subsidized LPG for bread production in the Bendungan Hilir area, Tanah Abang, Central Jakarta, Tuesday (1/2/2022). The increase in the price of 12 kilograms of LPG is felt by MSME business actors.
According to Faisal, the increase in fuel prices will also have an impact on logistics costs and food prices. Therefore, in order to reduce the impacts of global price increases on basic needs in the country, domestic fuel prices should be increased in stages.
The director of the Center of Economic and Law Studies, Bhima Yudhistira, said earlier that an increase in the prices of basic needs would further suppress the buying power of the lower middle class. According to him, people will face difficulty meeting their daily needs, especially those who have not fully recovered financially from the pandemic, if the price of basic needs also soared.
"Vulnerable people can [have a worse impact] so that inequality will widen further," he said.
The Finance Ministry’s Fiscal Policy Agency head, Febrio N. Kacaribu, said the government would continue to provide assistance to the poor and vulnerable in order to maintain their buying power by allocating a social protection fund of Rp 431.5 trillion from the 2022 state budget. In general, central and regional governments will work with Bank Indonesia (BI) and relevant authorities to create the right policy mix to maintain price stability at the national level.
According to Statistics Indonesia (BPS), Indonesia recorded deflation of 0.02 percent in February 2022, mainly due to a decline in the prices of cooking oil, eggs, and meat. However, this deflation is considered temporary amidst the risk of rising food and energy prices this year.
Based on a price survey conducted by BI, price movements during the first week of March remained under control. However, monthly inflation was estimated to increase to 0.32 percent, mainly due an increase in the prices of red chilies, cayenne pepper, tempeh, tofu, and shallots.
Westri Kekalih, an economics and business lecturer at Soegijapranata Catholic University in Semarang, expected the prices of basic needs would remain high in line with rising demand ahead of Ramadan and Idul Fitri.
SEKRETARIAT WAKIL PRESIDEN
Vice President Ma'ruf Amin
Meanwhile, National Food Agency head Arief Prasetyo Adi said the agency, together with a number of ministries and other institutions related to food, would try to ensure that supplies of various basic commodities were available at affordable prices.
In addition to the cooking oil problem, the government is also trying to stabilize the prices of other foods, such as beef, sugar and soybean. Its efforts include accelerating import realization to anticipate an increase in prices.
In addition to asking the State Logistics Agency (Bulog) and state-owned enterprises (SOEs) to import 100,000 tons of frozen buffalo meat and 20,000 tons of frozen beef, the government also allowed raw sugar imports through the Trade Ministry earlier to anticipate an increase in the price of sugar. This year’s import quota for sugar is set at 4.37 million tons.
Safe reserve supplies
Vice President Ma'ruf assured that basic foods would have safe and sufficient supplies ahead of Ramadan and Idul Fitri 2022. The availability of food supplies was based on data provided by the Agriculture Ministry.
The Vice President expressed the hope that even if food prices increased during Ramadan, they would remain at a reasonable level. Regarding the price increase and the recent scarcity of a number of basic commodities, the Vice President asked all relevant ministries to work together to handle the price increase. "I instruct all ministries to cooperate," he said.
The prices of some commodities are rising due to the increase in prices in the world, but it does not mean that there is a supply shortage.
On the same occasion, Agriculture Minister Syahrul Yasin Limpo explained about the supply situation for food and other agricultural commodities in the country. Syahrul assured that food supplies were safe and sufficient to meet demand. The increase in the prices of certain commodities, he said, was related to rising prices in the international market.
With the price increase, according to him, the government needed to improve its price stabilization measures. He said it was time for Indonesia to no longer be dependent on imported food.
"The prices of some commodities are rising due to the increase in prices in the world, but it does not mean that there is a supply shortage. Supplies are sufficient," said Syahrul. (DIT/DIM/MKN/WKM)
This article was translated by Hendarsyah Tarmizi.
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