Indonesia may hike fuel prices next week

INDONESIA’S president may announce a fuel price hike next week to reduce spending on energy subsidies, senior minister Luhut Pandjaitan said on Friday(Aug 19).

South-east Asia’s largest economy has tripled its 2022 energy subsidy budget to 502 trillion rupiah (S$46.9 billion) amid rising oil prices and a depreciating rupiah.

President Joko Widodo said earlier this week he was considering hiking prices, after Finance Minister Sri Mulyani Indrawati said more money would likely be needed if fuel prices were to be kept unchanged until the year’s end.

“Maybe next week the president will announce about the matter of raising (fuel) prices,” he said in a public lecture at a university in the city of Makassar, South Sulawesi, adding that his ministry has developed an economic model for the measure’s inflationary impact.

Indonesia’s inflation reached a seven-year high of 4.94 per cent in July due to rising food prices. The president has said that had the government not kept fuel prices and some power tariff unchanged, inflation may have soared higher.

Indonesians currently pay 7,650 rupiah per litrefor subsidised gasoline, which authorities say is about 40 per cent below estimated market price, while subsidised diesel is sold at 5,150 rupiah per litre, less than a third of market price.

Bank Indonesia is due to review its monetary policy on Monday and Tuesday and its governor has said heavy subsidies have given the central bank room not to rush its monetary tightening. REUTERS