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Indonesia says to hike fuel prices in early October JAKARTA - Indonesia plans to raise domestic fuel prices early next month, the government said on Monday, in the first clear indication of when it would reduce crippling but politically sensitive fuel subsidies. "We have not set the date but it will be in early October," State Secretary Yusril Ihza Mahendra told reporters when asked about the timing of the fuel price hike. He said the size of the increase was being calculated.

It will take effect just before or during the Muslim fasting month of Ramadan, a time Indonesian governments usually try to keep a lid on prices because of the inflationary impact from Eid al-Fitr celebrations at the end of the fasting month. Ramadan is expected to begin around Oct. 3 or 4 in Indonesia. President Susilo Bambang Yudhoyono has promised to raise fuel prices gradually, in the wake of pressure on the rupiah and the economy, to wean Indonesians off Asia's cheapest gasoline.

Ballooning fuel subsidies eat up more than a fifth of the budget and have raised concerns about Indonesia's fiscal sustainability as well as hurt the rupiah, which slumped to four-year lows against the U.S. dollar two weeks ago. Indonesia imports large amounts of crude oil and oil products, which it pays for by selling rupiah for dollars, a heavy burden amid soaring world oil prices.

A big rise in fuel prices in 1998 triggered rioting that was a factor behind the ouster that year of former autocrat Suharto. Yudhoyono raised fuel prices by an average 29 percent in March, sparking protests although there was little violence. Yudhoyono had told his cabinet to make sure food supplies were plentiful when the next round of fuel hikes took effect as well as make sure workers were not sacked because of the impact such hikes would have on businesses, Mahendra said.

"The president directed the economic ministers to work with other ministers such as transportation, trade and manpower to seriously prepare so when fuel prices are raised in October, all the main commodities are there like they should be," he said. Mahendra also referred to 250,000 tonnes of rice that state logistics agency Bulog has been given permission to import to ensure stocks are adequate during the fasting month.

His comments come after the government announced on Friday it had worked out a cash compensation package for 15.5 million families to cushion the blow from the expected hikes. Such families would get 100,000 rupiah a month, an amount that equals 1.55 trillion rupiah ($153.5 million) a month at current exchange rates. The compensation package still has to be presented to parliament for approval. The government has not said how long it would last once implemented.

Last Thursday, the government and a parliamentary budget committee agreed to cap fuel subsidies at 113.7 trillion rupiah this year, much lower than previous official estimates. Gasoline costs Indonesians 20 U.S. cents a litre at current exchange rates.


Link to related event Related event:
Fuel price hike 1 October 2005

Related blog entries (category 'Economy') Related blog entries (category 'Economy'):
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07 September 2005 · India and Indonesia react to oil price rises
05 September 2005 · Jakarta workers protest fuel price rise
31 August 2005 · SBY: Indonesia to wait until after October to raise fuel prices
31 August 2005 · Indonesia full year fuel subsidy seen at Rp. 138.6 trln


Posted in Economy @ 12 September 2005 08:40 CET by Jeroen · 'Blog' RSS feed · permalink






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