Lebaran Travelers Boost Regional Economies

KOMPAS/TOTOK WIJAYANTO

An officer records and checks cash before it is sent to branch offices and automated teller machines at the PT Bank Mandiri (Persero) Tbk Cash Center, Jakarta, Monday (25/4/2022). Bank Mandiri has prepared cash of around Rp. 28.28 trillion to anticipate the increasing demand for cash in the community during the Ramadan and Idul Fitri period.

JAKARTA, KOMPAS — The extended holiday of Idul Fitri spurs regional economic growth with the funds brought by travelers embarking on mudik (homecoming) estimated to amount to trillions of rupiah.

"Lebaran is the peak of the vast, consistent circulation of money in Indonesia because significant amounts of money are redistributed from cities to the mudik destinations," Sarman Simanjorang, Indonesian Chamber of Commerce and Industry deputy chairman for regional autonomy development, said on Monday (2/5/2022).

He said the citizens’ enthusiasm for mudik influences the regional economy and increases the productivity of various business sectors, such as transportation, culinary and micro, small and medium enterprises (MSMEs) sectors. In the transportation sector, operators of bus, travel, train, boat and air transportation services all experience a significant spike in revenue, which has a domino effect on the economy.

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On the way to their hometowns, travelers spend extra money on culinary delights, souvenirs or regional specialties, which boosts the revenue of local MSME entrepreneurs. Hotel occupancy rates increase, and restaurants and cafes are visited with higher frequency, both in the transit and destination areas.

With an estimated 85 million travelers, Sarman calculated a circulation of between Rp 28 trillion (US$1,935,352.06) and Rp 42 trillion during this year’s mudik. He said that approximately 28 million families are mudik travelers, each family comprising three members on average.

“If each family brings an average of Rp 1 million, the money redistributed to the regions is at least Rp 28 trillion. If each family brings Rp 1.5 million, the potential circulation of money is in the range of Rp 42 trillion,” he said.

KOMPAS/NINO CITRA ANUGRAHANTO

Tourists take pictures under the sign on Jalan Malioboro, Yogyakarta, Tuesday (3/5/2022). Tourist visits are getting busier after the 2022 Idul Fitri homecoming is allowed.

Such a huge circulation of money is believed to be able boost household consumption growth and subsequently contribute to national economic growth in the second quarter. "It means this year's Lebaran holidays will have a huge impact on regional and national economic growth," he said.

While positive about the economic impact, Sarman cautioned travelers to follow health protocols during their journey, adding that a spike in COVID-19 cases at the end of the holidays would be a drawback to economic recovery.

Augmented supply of cash

Bank Indonesia’s money management department director Eva Aderia said they had added Rp 27.4 trillion in currency provision during the month of Ramadan, bringing it to Rp 202.7 trillion, which was an increase of 31.2 percent from the correspondent period last year.

The additional currency was set aside to back up the initial allocation of Rp 175.26 trillion for this year's Lebaran season. As of April 27, the provision amounted to Rp 162.8 trillion.

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"The increasing need for cash aligns with the community’s robust activities," Eva said.

She said Java -- excluding Jakarta, Bogor, Depok and Bekasi (Jabodebek) -- was the area with the greatest circulation of money, at 38 percent of the total.

The Jabodebek area reported the second largest circulation, equivalent to 23 percent. Money circulation in Sumatra amounted to 22 percent of the total.

This article was translated by Musthofid.