Indonesia to provide more cash handouts to mitigate risk of rising food prices

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JAKARTA — Indonesia will provide additional cash handouts for three months covering January, February and March to mitigate the risk of rising food prices, its chief economic minister said on Jan 29, though some questioned the timing ahead of the election.

The government has allocated about 11.25 trillion rupiah (S$953 million) for the programme and the handouts will be given to 18.8 million families, Minister Airlangga Hartarto told reporters.

Each family will receive 200,000 rupiah for each of those months.

"The programme will last until March. After that, we will evaluate," Airlangga said.

Indonesia's headline inflation was 2.61 per cent at the end of 2023, within the central bank's target range. In 2024, inflation is targeted at 1.5 per cent to 3.5 per cent.

Mohammad Faisal, an economist with the local think-tank Centre of Reform on Economics, criticised the timing of the programme as food supplies, especially rice, will be sufficient with the incoming harvesting period and imports.

"I think this is very wrong because the risk of rising food prices will be lower after January, as we will enter harvest season soon," he said.

Rice harvest typically starts around March or April, but there are concerns there would be delays due to lingering impacts of the dry weather pattern El Nino in 2023.

Indonesia has set a rice import quota of two million tonnes for 2024. The state food procurement agency has launched a tender to buy 500,000 tonnes of rice earlier in January and expect the shipment to arrive before the harvest.

Faisal said the cash handout is prone to be misused for political purposes, as the timing is close to the upcoming general election on Feb 14.

However, Myrdal Gunarto, an economist from Maybank Indonesia, said the programme is needed to boost the purchasing power of low-income consumers in order to reach economic growth of around five per cent in the first quarter.

The new cash handouts came after the government extended for six months its rice handout scheme until June 2024, a programme that provides 10kg of rice monthly to 22 million lower-income households to help them cope with high prices of the staple.

The government also provided a two-month cash handout for millions of households of 400,000 rupiah per family for November and December 2023.

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