Image: Reuters Berita 24 English - According to a cabinet official on Friday, Indonesians should be prepared for a potential increase in fue...
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| Image: Reuters |
Berita 24 English - According to a cabinet official on Friday, Indonesians should be prepared for a potential increase in fuel prices as the government attempts to rein in its soaring energy subsidies in the face of rising global oil prices.
The biggest economy in Southeast Asia has increased its budget for energy subsidies by three times to 502 trillion rupiah ($34.22 billion) this year in order to maintain some gasoline and electricity rates and control inflation.
This might not be sufficient, though, as the finance ministry reports that almost the whole allotment of the subsidised fuel has already been consumed.
The subsidy bill could reach as much as 600 trillion rupiah, according to Indonesia's Minister of Investment Bahlil Lahadalia, if the government is forced to increase the quota for subsidised gasoline from 23 million to 29 million kiloliters, assuming oil prices remain high and the rupiah is in a weak position.
At a news conference, Bahlil said, "Please explain to the public that my belief is that we have to plan ready in case a fuel price hike happens. It is fiscally foolish to spend 25% of government revenues on subsidies.
"The state is under a lot of strain. Perhaps we can use this momentum to cooperate in order to maintain the health of our financial situation "Added he.
Sri Mulyani Indrawati, Indonesia's finance minister, said on Thursday that she has requested Pertamina, the nation's energy company, to restrict sales of subsidised fuels.
The government's intention to expand subsidies this year has drawn criticism from economists, who claim that doing so would divert funds from initiatives that would have greater economic benefits.
A growing price differential between subsidised and unsubsidized fuels, according to critics, has encouraged a change in domestic consumption habits and fuel smuggling to nearby nations, which has increased sales of subsidised fuels.
In the fourth-most populated country in the world, raising fuel prices is sensitive, and a head of government often makes such a choice. Street demonstrations have been prompted by previous government efforts to boost fuel costs.
(1 USD = 14,670,000 Rp)
