REPUBLIKA.CO.ID, JAKARTA -- Chief economic minister Chairul Tanjung said he had agreed with calls for reduction of fuel subsidy expenditure to give the government fiscal space and adequate funds to overcome poverty.
"The current subsidy is too high. Rather than using it for unnecessary purposes, it will be better if we allocate it for more important causes such as reducing poverty," he said here on Friday.
He said the government had to cut fuel subsidy to reduce fiscal burden but disagreed that raising fuel price was the main alternative.
"Raising the fuel price is not the only solution. We can also do it, for example, by prohibiting private cars from buying subsidized fuel oils. This will also reduce subsidy. So, when we talk about reducing subsidy, it must not be automatically associated with fuel price hike," he said.
Chairul Tanjung explained that energy subsidy, especially fuel oil and electricity, had always burdened the budget and limited the fiscal space, while on the other hand, the government still required funds to build infrastructures and pay for other social expenditures.
"In view of that, fuel subsidy reduction must be carried out by the new government because in percentage the total is too high," he said.
Finance Minister Chatib Basri said the new government would require an adequate fiscal space to carry out its working programs and boost economic growth.
"I do not believe our fiscal condition will be good and qualitative to support growth unless a fiscal space is available," he said.
He noted that one of the solutions to widen the fiscal space was raising the price of subsidized fuel oils to give flexibility to spend around Rp200 trillion.
He however admitted that the policy was not easy to implement due to its significant political implication, while it could also increase the rate of inflation and the number of the poor people.
The present government of President Susilo Bambang Yudhoyono will end its second term on October 20 this year following the July 9 presidential election, which was won by the Joko Widodo-Jusuf Kalla duo.
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