SOLYMONE BLOG: INDONESIA TO HIKE FUEL PRICES BY 50%

Indonesia’s President-elect Joko Widodo plans to raise the price of subsidised gasoline and diesel by around 50% within two weeks of taking office, a move that will save the government nearly US$13 billion (RM42.69 billion) next year, an adviser to Widodo told Reuters.
Widodo, who will take over the presidency of Southeast Asia’s largest nation on Monday, is under pressure to reduce a budget deficit inherited from the administration of the outgoing president, Susilo Bambang Yudhoyono.
The aide said Widodo aims to raise the price of both gasoline and diesel by 3,000 rupiah (RM0.80) per litre by November.

Indonesian fuel prices are among the cheapest in the region, with gasoline costing 6,500 rupiah a litre, and diesel costing 5,500 rupiah.
“The plan is November 1… but it’s safe to say they are likely to do it within the first two weeks of taking office,” said the adviser, who requested anonymity because he was not authorised to speak to the media, adding .
The adviser said Widodo could still decide to “change his mind” on the fuel price hike at the last minute.
Elected in July, Widodo had hoped a politically unpopular fuel price hike would be imposed before he took the reins, but President Yudhoyono denied the president-elect’s request in August.
The incoming president lacks a parliamentary majority, making it harder for him to push through measures, but parliament’s approval is not needed to increase administered fuel prices.
To offset the higher fuel prices, Widodo plans to provide the poorest families with 300,000 rupiah per quarter until the first quarter of 2016, the adviser said. And Widodo will consider whether to raise fuel price again in the fourth quarter of 2015, the adviser added.

The government is expected to save 156 trillion rupiah next year in fuel subsidy costs, the adviser said. Widodo’s advisers say the money saved would be diverted to spending on infrastructure, agriculture, education, and health projects.
The 2014 budget deficit had been targeted at 2.4% of gross domestic product, but it is in danger of busting a budget law setting the limit at 3% because of a shortfall in tax revenues and the slowest economic growth in five years.

Source: Reuters.