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Prabowo Plan to Cut Fuel Subsidy for Free Lunches Can Lower Tax Income, Observer Says

19 February 2024 13:19 WIB

TEMPO.CO, JakartaReforminer Institute executive director Komaidi Notonegoro commented on the discourse to cut fuel subsidy budget to realize the free lunch program as promised by presidential candidate Prabowo Subianto and his running mate Gibran Rakabuming Raka. Komaidi said the plan has a high risk of disrupting the balance of the state budget.

Komaidi said energy prices were vital, and a cut in the fuel subsidy budget could reduce people's purchasing power. This is because when energy prices rise, people will adjust their consumption rate by reducing other expenses.

This, he said, will lead to a drop in economic growth. "If economic growth falls, tax revenues will also fall because it is calculated from the GDP ratio," Komaidi told Tempo on Saturday evening, Feb. 17.

Komaidi underlined that the state budget revenues will automatically decrease if tax revenues dropped, as it is the largest component.

He said that the future government must be careful in balancing the budget, as the concepts of macroeconomics and energy are like two sides of a coin, which means in order to boost the economy, the state must pay great attention to the energy sector's growth.

Komaidi said that there is this notion as if today's large fuel subsidy budget could be shifted to other programs. However, the risk is huge, he said, as Indonesians are still very sensitive to rising energy prices.

To run the free lunch program launched by Prabowo, the required budget is estimated at Rp400 trillion. To that end, there is a plan to cut the fuel subsidy budget, as revealed by Prabowo-Gibran's campaign team deputy Eddy Soekarno during an interview with Bloomberg TV on Feb. 15.

Later, Eddy denied the plan to cut fuel subsidies, and claimed that his statement was inaccurately quoted. However, he did not deny that Prabowo-Gibran would evaluate the provisions on energy subsidies if they officially win the 2024 presidential election.

Riani Sanusi Putri

Editor's Choice: Indonesia's Retno Marsudi to Deliver Oral Statement on Palestine in ICJ This Friday

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