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Observer: state budget increasingly comes under pressure JAKARTA - The 2012 state budget will increasingly come under pressure from soaring fuel subsidy due to a rise in global crude price, an economist said. "With the global crude price reaching US$126 a barrel, the fuel subsidy may soar to Rp238 trillion," Ikhsan Modjo of Brawijaya University in Malang, East Java, said on Sunday.

He expressed hope the House of Representatives (DPR)`s budgetary board which was discussing fuel oil policy with the government would be able to find the best solution to the soaring fuel subsidy.

At a working meeting with the Budgetary Board in the past couple of days, Finance Minister Agus Martowardoyo proposed a fuel subsidy of Rp138 trillion with the price of subsidized fuel oils increasing Rp1,500 to Rp6,000 a liter effective April 1, 2012.

Members of the budgetary board were divided over the government`s proposal. The meeting to discuss the amount of fuel subsidy is expected to resume on Sunday evening.

If no agreement was reached at the meeting, the government`s proposal would be decided at a plenary meeting of the DPR scheduled for Thursday (March 29). Ikhsan said with the assumed oil price of US$126 a barrel, the amount of fuel subsidy would soar by Rp100 trillion.

Right now the economic price of fuel oil was Rp9,000 a liter or the burden of fuel subsidy reached Rp4,500 a liter, he said. "The oil price is predicted to continue to increase and hit a record high of US$160 a barrel, thus putting a further strain on the state budget," he said.

He said the increase in fuel subsidy would increase a deficit in the state budget and the amount of foreign debts. With a fuel subsidy of Rp238 trillion, the budget deficit would increase to 4.6 percent of the gross domestic product, he said. "The deficit figure violates the law which allows a maximum of 3 percent," he said.


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Related blog entries (category 'Economy') Tags: burden, economic, subsidy, fuel


Posted in Economy @ 26 March 2012 13:18 CET by Blog Bot · 'Blog' RSS feed · permalink






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