Indonesia is facing multiple simultaneous shocks—including the depreciation of the rupiah, rising global oil prices, adjustments to non-subsidized fuel prices, and the expansion of the Free Nutritious Meals (MBG) program through SPPG—which together are likely to intensify pressure on food inflation.
The depreciation of the rupiah is associated with higher food prices, particularly for import-sensitive commodities such as garlic, beef, and soybeans. The relationship typically begins to emerge around three months after the shock, strengthens between the third and seventh months, and peaks around the tenth month.
Higher global oil prices are linked to adjustments in domestic fuel prices, particularly Pertamax. In turn, fuel price increases are associated with rising food prices, with the strongest impact occurring approximately four to five months after fuel price adjustments.
The expansion of SPPG under the MBG program is also associated with higher local food prices through increased demand (demand-pull inflation), although the magnitude of the impact varies across commodities.
The accumulation of these shocks has the potential to raise production and distribution costs, weaken household purchasing power, and increase pressure on businesses, farmers, and the government’s fiscal position. These findings underscore the importance of strengthening strategic food reserves, improving supply chain efficiency, and refining the targeting of the MBG program to enhance fiscal efficiency while preserving fiscal space for other national priorities.
