Economist: Govt Should be Able to Control Inflation

TEMPO.CO, Jakarta - The Secretary of the National Economics Committee, Aviliani, said that the government has the capacity to control inflation that comes from the increasing price of fuel by manipulating the demand side of the equation. For example, by limiting the consumption of subsidized fuels by privately-owned vehicles.

According to Aviliani, the consumption of subsidized fuels by private motorists needs to be reined in as it eats up the yearly quota by around 40 percent. “The government must take bold measures. They can’t just rely on policies - they need to do something to decrease the demand on the field,” said Aviliani in Jakarta, September 1, 2014.

Aviliani said that limiting the prohibiting the consumption of subsidized fuels by private motorists can help the government save up to 40 percent of its’ budget. However, this problem continues to burden the State Budget because the government is still allowing both cars and motorcycles to fill up with subsidized fuel - despite the limited reserves earmarked for the year.

If the government refuses to increase the price of fuels, Aviliani said that in order to decrease the pressure on the budget, then privately-owned cars should be barred from filling up with subsidized fuels - leaving the quota for motorcycles and public transport operators. “By undertaking these steps, the government can decrease the cost of subsidizing fuels by up to 60 percent,” said Aviliani.

AISHA SHAIDRA