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JAKARTA - President Susilo Bambang Yudhoyono said on Wednesday oil subsidies may rise to 14.1 bn euro this year if crude prices average $140 a barrel and urged parliament to work with the government to tackle the issue. Fuel prices were increased in May due to ballooning subsidies on the back of soaring global oil prices, sparking protests in a country where millions are already suffering from higher food prices.
"We increased fuel prices in May to lower the burden on our economy by 28.7 per cent on the assumption the oil price would be $110 to $120 per barrel," Yudhoyono told reporters in Palembang, the capital of the province of South Sumatra. "With oil prices at $140 a barrel, will have to spend 205 trillion rupiah (14.1 bn euro) on subsidies," he said, adding the government would also need to spend 90 trillion rupiah on electricity subsidies.
"This is really not healthy for our economy." Despite the fuel price hike, Southeast Asia's biggest economy still has some of the lowest fuel prices in the region. The move has proved unpopular with many ordinary Indonesians, providing ammunition for Yudhoyono's political rivals, and has pushed up inflation in Southeast Asia's biggest economy. The budget forecast targets subsidies of 126 trillion rupiah based on a crude price of $95 a barrel.
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