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The Financial Express

Indonesia plans fuel price hike to control ballooning subsidies

| Updated: August 17, 2022 11:07:36


Indonesia plans fuel price hike to control ballooning subsidies

Indonesia plans to hike fuel prices to control ballooning energy subsidies, media reported on Monday, citing comments from the country's energy minister.

Reuters says the price hike will be complemented with rules on subsidised fuel sales that will be issued this month, Energy Minister Arifin Tasrif was quoted as saying by several local media, including news website Bisnis.com.

Officials at the country's energy, finance and economics ministries did not respond to Reuters' request for comment.

State energy firm Pertamina, which sells subsidised fuels, declined to comment, saying fuel price policy was the government's domain.

Indonesia has tripled its energy subsidy budget to 502 trillion rupiah ($34.06 billion) this year to keep prices of subsidised gasoline and diesel and some power tariffs unchanged amid rising global energy prices.

Last week, finance ministry officials said that amount may not be sufficient due to rising fuel demand.

Pertamina said as of July it had sold 9.9 million kilolitres of subsidised diesel, about two thirds of the total quota for the year, while sales of subsidised gasoline had reached 16.8 million kilolitres, or 73 percent of 2022's quota.

President Joko Widodo, in recent public appearances, has mentioned this year's energy subsidy allocation is too large, but has not referred to any plan to hike fuel prices.

The central bank has said the large subsidy budget has helped Southeast Asia's biggest economy keep inflation relatively low this year, providing monetary policymakers room to delay interest rate hikes. Bank Indonesia is one of a few Asian central banks that has not lifted its benchmark rate from pandemic era levels.

Said Abdullah, a senior member of the president's political party, the Indonesian Democratic Party of Struggle (PDI-P), told Reuters fuel prices should be raised twice this year to manage the increasing fiscal burden, suggesting the first hike be made by late August.

The government should also increase spending on support for the poor to help them cope with the impact of the price hikes, Abdullah, who heads parliament's budgetary committee, said.

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