by Stefanno Sulaiman and Yuddy Cahya Budiman
JAKARTA (Reuters) – Indonesian authorities braced for mass protests on Monday following an unwelcome rise in fuel prices, the government said The move could push inflation to 6.8% this year, but have a limited impact on economic growth.
President Joko Widodo bites the bullet by raising subsidized fuel prices by about 30 % Saturday to rein in ballooning energy subsidy budget, ends Weeks of deliberation over the impact on the public and the specter of mass protests.
Police have stepped up their presence in the capital, Jakarta, and deployed hundreds of petrol stations ahead of a demonstration planned by workers’ groups on Tuesday.
Small rallies were held again over the weekend and Monday as students and workers expressed anger at rising fuel prices due to rising food costs, tires were burned, some roads were blocked, and the public remained uneasy from COVID-19 Impact.
“Until the government lowers fuel prices, we will continue to talk about this,” said protester Lanto Mombura, a member of the Islamic Students’ Association.
“The government is issuing policies without taking into account the well-being of people who are still recovering from the pandemic.”
National Police Chief Listyo Sigit Prabowo told local authorities on Monday Increase engagement with the public, explain why the rate hike is necessary, and prevent temper tantrums.
Indonesia’s high energy subsidy budget has capped its inflation rate even as policymakers around the world are raising interest rates at a frantic pace.
Fuel increase will reduce subsidy spending by about 48 trillion IDR (US$3. 22 billion) to 650 trillion rupiah this year, Deputy Finance Minister Suahasil Nazara said, but it would also accelerate inflation.
Treasury official Fabrio Caccarib said Monday that economic growth this year is still likely to rise from 2021 3.69% to 5.2%, the authorities will keep interest rates in the range of 6.6% to 6.8% by ensuring sufficient food supplies to offset rising fuel prices to control inflation.
Suahasil said higher prices will push up inflation, but monthly rates should return to normal in November.
“Typically, inflation rises rapidly within a month or two, and by the third month, it starts to normalize,” he said.
“Why create this chaos?”
Rising prices may anger some Indonesians who are just recovering from the economic blow of the pandemic.
“Why, why is the oil price going up again, why?” said Ismail, a motorcyclist with a ride-hailing app in the capital Jakarta, who, like many Indonesians, only has a name.
“It’s only three months now, we’re starting our own lives again, and fuel prices have gone up. Why create this mess? It’s all screwed up.”
Bank Indonesia (BI) will increase the pace of interest rate hikes in the wake of higher fuel prices, raising borrowing costs by 25 basis points last month, economists said on Monday.
The annual inflation rate in August was 4.25%, which has been above the central bank’s 2%-4% target range for the third consecutive month, due to Food prices are high.
“Given that price pressures have been in place for some time this year ahead of the fuel effect, the extent to which the price effect widens will be the key to watch now,” said OCBC Bank economist Willian Wayne Wellian Wiranto predicts inflation will exceed 7% in the coming months. His “last option” as financial pressures mount.
($1=14,25.0000 Indonesian Rupiah)