Receh.in - The Indonesian government's decision to increase subsidies and compensation for fuel and electricity has saved the country's economy in 2022, according to the Minister of Finance, Sri Mulyani Indrawati.
Indrawati stated that the Indonesian economy was on the brink of collapsing, similar to what has happened in Europe recently.
Without the implementation of Presidential Regulation 98/2022, which regulates spending on subsidies and compensation for fuel and electricity, the state budget would have been unable to withstand the burden of rising global oil and commodity prices, Indrawati said.
The regulation increased the state budget's spending on subsidies and compensation from IDR 152.5 trillion ($10.6 billion) to IDR 502.4 trillion ($34.5 billion), helping to minimize the impact of rising fuel and electricity prices on the public, and even preventing some price increases.
This has eased the pressure on the national economy, unlike many European countries that have experienced a sharp economic downturn due to the direct shock of rising commodity prices, particularly for fuel and electricity.
"If we hadn't made this adjustment to our spending by increasing subsidies and compensation, it's possible that oil prices could have increased fourfold," Indrawati explained to the media. "This is similar to the situation in Europe, where the economy has been severely weakened by the need to absorb the shock of rising commodity prices directly."
The government's tactical decision to increase compensation and subsidies for fuel and electricity was necessary because the state budget assumed an oil price of $63 per barrel, while the actual price reached as high as $126 per barrel. The exchange rate for the Indonesian rupiah also deviated from the budget assumption of IDR 14,350 per dollar to an average of IDR 14,871 per dollar over the past year.
"As a result, subsidies and compensation for fuel and electricity have surged more than threefold, and by the end of last year, the total had reached IDR 551.2 trillion," Indrawati concluded.
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