Analyst Suggests Jokowi to Trim Budget Than Fuel Subsidy Cut

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  • Joko Widodo atau Jokowi. REUTERS/Darren Whiteside

    Joko Widodo atau Jokowi. REUTERS/Darren Whiteside

    TEMPO.CO, Jakarta - David Sumual, chief economist at Bank Central Asia, said that president-elect Joko “Jokowi” Widodo has no option to create a fiscal space except cutting the fuel subsidy. However, If Jokowi refused to do that, David said that Jokowi must take several measures to trim the budget and optimize the state revenue.

    According to David, efficiency measures can be applied in non-compulsory budget since the compulsory ones, such as health and education, had been set by the constitution.

    “If both compulsory budgets were insufficient, he could get impeached,” David said.

    Meanwhile, David said that it would take some time to optimize state revenue because non-tax state revenue from commodities and natural resources has been declining. Similar condition also applies to the tax state revenue since tax system reform would be a lengthy process.

    David explained that fuel subsidy cut would be the most acceptable move provided that the government conducts appropriate socialization.

    “Public should be informed about the impacts of fuel price increase. However, the fuel price hike should be balanced with improvements in infrastructures,” David explained.

    Unfortunately, David suggested, the fuel price increase is not only related to economic matter, but also political.

    “Political bargaining is no longer reasonable in this situation,” he said.