Easing the Pain

Manggi Habir*

Jokowi's presidency began with high expectations and promises of change. But the difficulty and subsequent delay of forming a cabinet of his choice and the need to compromise on certain positions was disappointing. However, facing his first tough test of raising domestic fuel prices to cut government subsidies, thus freeing funds for infrastructure and other development spending, his methodical approach so far is getting positive response. One problem is to adequately address the rise in food prices and general inflation that normally follows fuel price hikes in the past. It is this that cuts into the spending power of the poor.

According to Anton Hendranata, economist at Bank Danamon, the past fuel price hikes does not directly impact the poor, but it is the rising transportation costs that follow that translates into higher food prices that do. Indonesia's poor transportation infrastructure condition also adds to this cost. The long-term solution is to invest and improve the country's infrastructure, which will take time. But for the short-term, having sufficient food stock is critical to be able to flood the market whenever inflationary pressures arise.

November 11, 2014