August Inflation under Control despite Fuel Restriction

TEMPO.CO, Jakarta – The inflation rate for August 2014 is not expected to jump significantly albeit the government's decision to limit the distribution of subsidized fuel since the beginning of the month. Aviliani, an economist from the Institute for Development of Economic and Finance (Indef), estimated August inflationto be in the range of 0.5 to 1.0 percent.

On July 24, the Indonesian Upstream Oil and Gas Regulatory Agency (BPH Migas), issued a circular limiting the consumption of subsidized fuel in some parts of Indonesia.

Since August 1, the sale of subsidized diesel—known as Solar—in Central Jakarta was eliminated. On August 4, Solar sales Java, Bali, Borneo, and Sumatra will be limited from 8:00 to 18:00 only in several gas stations. Starting next week, the sale of subsidized gasoline—known as Premium—will be prohibited on gas stations located on toll roads.

University of Indonesia economist Lana Soelistianingsih also said that limiting the sale of subsidized fuel will not have a significant impact on inflation, because the government has been successful in maintaining food price stability by importing food since March this year.

According to Lana, fuel restriction will not deter the increase of logistics and transportation costs, something that "the government always uses as a reason to make policies."

The government decided to limit the sales of subsidized duel after the quota pegged in the 2014c Amended State Budget is threatened to deplete due to excessive consumption.

PERSIANA GALIH | MAYA NAWANGWULAN | TRI ARTINING PUTRI