Small businesses in Indonesia prepare for the effects of the increase in fuel prices by saying, “There is nothing we can do.”

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Last Updated on September 11, 2022 by Bitfinsider

Owner of a car rental business in Banjarmasin, South Kalimantan, is 41-year-old Zainal Ridho.

Previously, the day rate for his Toyota Innova was 800,000 rupiah (US$54), including the cost of the subsidised Pertalite fuel.

In response to widespread speculation that the government would shortly increase the price of subsidised fuel, he hiked the price to 900,000 rupiah per day last week.

Additionally, due to rising costs, his 20 staff have asked for pay raises as well.

The government said last weekend that it would increase subsidised fuel prices by nearly 30% in response to rising worldwide prices.

The cost of subsidised diesel increased from 5,150 to 6,800 rupiah per litre. The price of subsidised gasoline has increased from 7,650 to 10,000 rupiah per litre.

President Joko Widodo stated last Saturday that the action is vital to reduce spending on soaring energy subsidies (Sep 3).

According to him, the government budget for energy subsidies has grown from the initial 152.5 trillion rupiah authorized last year to 502.4 trillion rupiah.

The government predicts that the increase in fuel prices will increase inflation from its current rate of 4.69 percent to around 6.6 percent.

The government increased the price of 92-octane gasoline in addition to diesel and 90-octane gasoline, locally referred to as Pertalite.

The price of Pertamax increased from 12,500 to 14,500 rupiah per liter. The majority of people who own cars with newer, more powerful engines use pertamax.

An hour after the president’s declaration, the fuel price increase went into effect.

The government announced that it will provide direct cash transfers to around 20 million disadvantaged households in an effort to lessen the shock.

During the broadcast announcement, Mr. Widodo remarked, “We will distribute 150,000 rupiah every month starting from September for four months to 20.65 million impoverished households.”

This week, there were intermittent rallies in a number of Indonesian cities despite these efforts.

Thousands of people protested the price increase in Jakarta. Similar demonstrations were also staged in Surabaya, Makassar, and Kendari, among other cities.

The transport ministry announced on Wednesday that prices for app-based motorbike taxis, a well-liked daily means of transportation, will increase as a result of the increase in gasoline prices.

Starting this weekend, there will be a 6% to 13.3% rise in fare per kilometer.

With a gross national income of $4,140 per person in 2017, Indonesia is a lower-middle income country whose economy is dependent on its micro, small, and medium-sized businesses (MSMEs).

About 98 percent of them are microbusinesses, which are vulnerable to even slight changes in economic policy.

While it is still too early to gauge the full effects of the fuel price increase, businesses all around Indonesia are already preparing for the long-term effects.

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