In Indonesia, Prabowo Subianto has yet to make a decision on potential adjustments to energy subsidies, as reported by a senior member of his team on Friday. Media outlets speculated that the likely new president would make changes to subsidies as the first order of business upon taking office in October.
Prabowo has received advice to review the expensive fuel subsidies, which amounted to 500 trillion rupiah ($32 billion) last year, to ensure that only those in need would benefit. However, it remains uncertain whether the defence minister will heed this suggestion, according to Eddy Soeparno, the vice-chair of his campaign team, as reported by Reuters.
“I cannot say (Prabowo) has agreed, but the advice from a team of experts is for him to make the state budget more efficient,” Eddy told Reuters.
Prabowo claimed victory after unofficial “quick counts” by independent pollsters indicated that he secured approximately 58% of the votes in Wednesday’s presidential election, a practice that has been accurate in previous elections. Once the results are officially confirmed, the new government will assume office in October.
Indonesia currently provides subsidies for certain types of fuel and electricity tariffs, a policy that has kept inflation low but has also left the state vulnerable to fluctuations in global oil prices.
Prabowo’s campaign promises and his remarks on taking on more public debt have raised concerns among rating agencies and economists about the country’s history of fiscal discipline.
“We believe medium-term fiscal risks have risen, given some of Prabowo’s costly campaign pledges, including a free lunch programme amounting to around 2% of GDP, and his statements that Indonesia could sustain a significantly higher government debt/GDP ratio,” said Thomas Rookmaaker, head of Asia-Pacific sovereigns at Fitch Ratings.
Prabowo’s proposed free school lunch and milk initiative could cost the government around 450 trillion rupiah per year, as estimated by his team.
The likely new president has also vowed to uphold outgoing President Joko Widodo’s major legacy project of relocating the capital to a city under construction called Nusantara in the Borneo jungle, which is expected to cost $32 billion in total.
Worries about Prabowo’s fiscal management have sparked speculation in the financial markets about who he would choose as his finance minister to succeed the highly-regarded incumbent, Sri Mulyani Indrawati.
“Going forward, as the administration aims for high growth, the possibility of the new finance minister being someone advocating for aggressive expansion of the fiscal policy cannot be ruled out,” said Ryota Abe, an economist with Sumitomo Mitsui Banking Corporation.
($1 = 15,645.0000 rupiah)
(Reporting by Ananda Teresia and Stefanno Sulaiman; Writing by Gayatri Suroyo; Editing by Raju Gopalakrishnan)
