Govt to Provide Social Assistance to Maintain Buying Power

The government will spend up to Rp 2.17 trillion (US$141 million) to finance three types of social assistance to help maintain the buying power of the people affected by the increase in the price of goods.

CYPRIANUS ANTO SAPTOWALYONO

Minister of Finance Sri Mulyani said that the government would add social assistance in order to divert fuel subsidies at the Presidential Palace Complex, Monday (29/8/2022).

JAKARTA, KOMPAS — The government has prepared three social assistance programs to maintain the buying power of the people who are at risk of being affected by the planned increase in fuel prices. About Rp 24.2 trillion ($1.62 billion) will be allocated to finance the social assistance aids which will be distributed beginning this week.

Speaking to reporters after a limited cabinet meeting chaired by President Joko “Jokowi” Widodo on Monday, Finance Minister Sri Mulyani said that the three social assistance programs would include cash transfer (BLT), wage subsidy assistance and assistance from general transfer funds.

As many as 20.65 million poverty-stricken families are expected to receive the BLT cash aid. According to the plan, each poverty-stricken family will receive Rp 600,000. The Social Affairs Ministry will distribute the cash aid twice, each at Rp 300,000, through the offices of the state owned postal company PT Pos Indonesia throughout the country. The first transfer will be carried out this week and the second in December.

Also read:

> Fuel Price Hike and Social Protection

> Economic Resilience and Fuel Subsidy

Meanwhile, the wage subsidy assistance will be given to 16 million workers with a maximum salary of Rp 3.5 million per month. Each worker will receive Rp 600,000, which is paid once by the Manpower Ministry.

In addition, Sri Mulyani said, “President Jokowi had also asked local governments to use 2 percent of general transfer funds (DTU) to help the transportation sector, such as public transportation, motorcycle taxis and fishermen, as well as provide additional social protection.”

Overall, the total budget to be allocated for the three social assistance programs will reach Rp 24.2 trillion. The amount consists of Rp 12.4 trillion for BLT, Rp 9.6 trillion for wage subsidy assistance and Rp 2.2 trillion for assistance in the transportation sector and additional social protection.

"At present, every month, the central government distributes general allocation funds (DTU) and DBH (profit sharing funds). The DTU assistance and 2 percent of DBH funds will be given to the community in the form of transportation assistance and also for ojek (motorcycle taxi) drivers, fishermen and additional social assistance," she added.

KOMPAS/RONY ARIYANTO NUGROHO

Online motorcycle taxi drivers take action in front of the DPR complex, Jakarta, Monday (29/8/2022). They rejected the government's plan to increase subsidized fuel oil and asked the DPR to listen to the public's voice on this matter.

The Finance Ministry also plans to issue a regulation so that 2 percent of general transfer funds can be distributed as transportation subsidies for the people. According to the President, the assistance provided by the Social Affairs Ministry is quite large, but local governments are also asked to play a role.

"Hopefully these various social assistance programs can help maintain the buying power of the people affected by the price increases today and help reduce Indonesia's poverty rate," she said.

Also read:

> Fuel Subsidies Mostly Enjoyed by the Rich

The President said that all social aids to be taken from the cut of the fuel subsidies could be distributed beginning this week. The cash aid, as well as the wage subsidy, should be distributed immediately.

Social Affairs Minister Tri Rismaharini said that the social aid programs will add the routine social assistance which has so far been provided by the government. Based on experience, the distribution of the social aids through PT Pos Indonesia can be completed in less than two weeks. "Currently, the cash aid is ready but will be distributed later, on Sept. 1, together with all routine social assistance," she said.

Increase impact

The chief economist of Bahana Sekuritas Satria Sambijantoro estimated that the increase in the price of subsidized gasoline Pertalite and biodiesel by Rp 2,850 per liter each would be sufficient to compensate for the shortage of fuel subsidy until the end of this year. Raising the price of Pertalite from Rp 7,650 per liter to Rp 10,500 per liter and the price of biodiesel from Rp 5,150 per liter to Rp 8,000 per liter will contribute to an increase in inflation to between 6.8 percent and 7.2 percent this year.

“An increase in the price of subsidized fuel can have further effects on rising prices of food, building materials and transportation. Whenever there is inflation, the most affected are the people of the lower-middle class because the portion of food consumption is the largest,” said Satria.

Economist of the Institute for Economic and Community Research (LPEM) of the School of Economics and Business in University of Indonesia, Teuku Riefky, said in order to reduce the state budget deficit to below 3 percent of gross domestic product (GDP), budget efficiency needs to be carried out starting this year.

This article was translated by Hendarsyah Tarmizi.