JAKARTA - The government has room for raising fuel prices further to cut fuel subsidy spending amid continuing high world oil prices, a senior World Bank official said. 'Continuing high level of oil prices obviously suggests that there is room for further such policy actions (fuel price hikes),' the bank's vice president for East Asia and the Pacific region Jemal-ud-din Kassum said.
He told reporters following a meeting with Vice President Jusuf Kalla that it is up to the government to decide whether another fuel price increase is necessary. The government last raised fuel prices by an average of 29 pct in March. Kassum said the saved subsidy funds from the last price hike supported fiscal sustainability and improved basic services in health and education for the poor.
'We are very encouraged by the direction they have taken so far,' he said. High world oil prices, declining oil production at home and rising fuel demand have put a strain on the government's state budget. Fuel subsidy spending this year may reach 110 trln rupiah, exceeding the budget limit of 76.5 trln, Vice President Kalla said yesterday.