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Cash assistance to replace fuel subsidy, economist: Must target aspiring middle class

Source
Tempo - October 4, 2024

Nabiila Azzahra, Antara, Hammam Izzudin, Jakarta – The Executive Director of the Center of Economic and Law Studies (Celios), Bhima Yudhistira Adhinegara, believes that Prabowo's government plan to replace energy subsidies with cash assistance must also target the aspiring middle class of Indonesia. According to Bhima, the action is necessary to avoid a weakening purchasing power within the country.

Bhima said Prabowo Subianto-Gibran Rakabuming Raka's government plan for cash assistance will significantly save the budget allocated for fuel subsidies. Further, he said, the program could push more people to use public transport and speed up the country's energy transition process.

"However, we must note the fact that the recipients of cash assistance and subsidized fuel users are not all within the poor category," he told Tempo via brief text message on Thursday, October 3, 2024.

"We are worried about the possible weakening purchasing power if the government limits the target recipients of the cash assistance that compensates for fuel subsidies. Household consumption could grow below 4 percent year-on-year next year," he said.

Thus, if the future government plans to change the fuel subsidy mechanism, then the cash assistance must target both the lower class and aspiring middle class citizens in Indonesia.

Statistics Indonesia (BPS) previously recorded that middle class and aspiring middle class citizens cover 66.35 percent of Indonesia's total population. Since 2019, the number of middle class citizens in Indonesia has declined from 57.33 million to 47.85 million in 2024. In contrast, the aspiring middle class increased from 128.85 million in 2019 to 137.50 million in 2024.

According to the Ministry of Social Affairs website, cash assistance, locally known as BLT, is distributed to ease the burden and protect the purchasing power of underprivileged communities from the pressure of hiking prices. BLT targets 20.65 million Indonesians included in the Basic Food Program, or non-cash food assistance (BPNT), and the Family Hope Program (PKH).

Previously, the plan to substitute fuel subsidy for cash assistance was brought up by the Head of the Expert Council of the Prabowo-Gibran National Campaign Team (TKN), Burhanuddin Abdullah, when attending the UOB Indonesia Economic Outlook 2025 event on Wednesday, September 25.

The former Bank Indonesia Governor claimed the cash assistance would save around Rp150-200 trillion of budget. Tempo has contacted Burhanuddin to ask further about the details of this plan, but no response was delivered by the time this article was published.

Source: https://en.tempo.co/read/1924490/cash-assistance-to-replace-fuel-subsidy-economist-must-target-aspiring-middle-clas

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