MARKET DEVELOPMENT
Indonesia to consider subsidising cooking oil to curb inflation
Indonesia to consider subsidising cooking oil to curb inflation
23.12.2021 (www.theedgemarkets.com) - JAKARTA (Dec 23): Indonesia is considering subsidising cooking oil for its domestic market using revenue from a palm oil export levy as authorities seek to keep inflation in check amid a rise in commodity prices, its trade minister said on Thursday (Dec 23).
Indonesia, the world's biggest producer and exporter of palm oil, has been benefiting from high commodity prices, which have driven exports to record levels. And unlike in some other economies, its consumer inflation has so far appeared relatively unaffected.
November's inflation rate was 1.75%, the highest in 17 months but remained below the central bank's comfort range of 2% to 4%.
However, Trade Minister Muhammad Lutfi noted that cooking oil prices had jumped significantly, which could affect people's purchasing power.
The average price of palm oil-based cooking oil as of Wednesday was more than 40% higher than a year ago at 17,800 rupiah (US$1.25 or about RM5.27) per litre and well above the 11,000 rupiah reference price set by the ministry, official data showed.
The government plans to intervene by selling 11 million litres at a price of 14,000 rupiah per litre, but if market prices remain high, it may look to subsidise using funds from its palm export levy, Lutfi added.
Although no decision had been made, he said subsidies are likely only to apply to cooking oil sold in bulk, of which Indonesians typically consume around two million tonnes a year. Indonesia's overall consumption is around eight million tonnes of cooking oil annually.
"The difference between palm and soy oil prices has been too wide, which usually means there will be a correction and we have already seen CPO (crude palm oil) prices plateaued," Lutfi said.
"The ministry will continue to ensure cooking oil's affordability to the people," he added.