Indonesia s new president plans steep fuel price rises next month
JAKARTA (Reuters) Indonesia s President elect Joko Widodo plans to raise subsidised gasoline and diesel prices by around 50 percent next month in a bid to bring down the budget deficit in Southeast Asia s largest economy, an adviser told Reuters on Friday.
The new government will be taking a highly unpopular step, but some worries for the minority coalition s future were eased by opposition leader Prabowo Subianto offering qualified support for Widodo s administration at a joint news conference following the rivals first meeting since a disputed election in July.
Due to be sworn in on Monday, Widodo has to urgently address Indonesia s biggest fiscal problem a $23 billion fuel subsidy bill that is the main driver behind the counpatagonia better sweater sale womenstry s twin budget and current account deficits.
The adviser said the incoming president plans to raisepatagonia black hole duffel 90l review the price of gasoline by 46 percent, and diesel by 55 percent, possibly as early as Nov. 1, in a move that will save the government nearly $13 billion next year.
Raising fuel prices is a sensitive issue that typically sparks protests and contributed to the downfall of long serving autocrat and then president Suharto in 1998.
Widodo could still amend his plan, the aide said, but whereas the size of the increases will be criticised by opposition parties, the government does not need parliamentary approval to raise fuel prices.
The former Jakarta governor will need support for futurpatagonia alpine guide pants teste tricky decisions, however, and he has sought to mend ties Prabowo after a disputed election that was the closest in Indonesia s history.
Their meeting on Friday appeared to ease tensions, though it was unclear whether they discussed a hike in fuel prices.
Our objectives are the same . everything will be done for the good of tpatagonia gunnison gorge wading pants reviewhe nation, Widodo said.
Prabowo, a former general, congratulated Widodo and saluted him once the press confepatagonia black hole duffel 90l review2rence was over.
I conveyed that the party I lepatagonia river master ii vest reviewad, my supporters, I will ask them to support Joko Widodo and the government he will lland for sale in patagonia arizonaead, Prabowo said. When there are things that we judge to not be for the benefit of the people. we will not hesitate to criticise.
The prospect of a fuel price hike to bring down a worrying fiscal deficit, and Prabowo s soothing words gave heart to investors in Indonesian assets.
The stock market rose around 1 percent, as did the rupiah currency, while 10 year government bond yields eased.
PROTECTING THE POOR
Widodo currently plans to raise the price of both gasoline and diesel by 3,000 rupiah ($0.patagonia outlet store 7925) per litre by Novembpatagonia better sweater and saleer, the advisor said. Indonesian fuel prices are now among the cheapest in the region, wpatagonia clothing reviewith gasoline costing 6,500 rupiah a litre, and diesel costing 5patagonia new york,500 rupiah.
We would probably oppose it on the grounds it would be too much of a shock to the system, Hashim Djojohadikusumo, a top aide and brother of Prabowo told Reuters last week.
He said opposition lawmakers would likely favour a smaller increase in pump prices, of around 1,000 1,500 rupiah.
The government is expected to save 156 trillion rupiah ($12.76 billion) next year in fuel subsidy costs, the adviser said. In the 2015 budget, fuel and gas subsidies make up 13.5 percent of government spending.
Widodo s advisers say the money saved would be diverted to spending on infrastructure, agriculture, education, and health projects.
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.
A further fuel price will be considered in the fourth quarter of 2015, the adviser added.
The 2014 budget deficit had been targeted at 2.4 percent of gross domestic product, but it is in danger of busting a budget law setting the limit at 3 percent because of a shortfall in tax revenues and the slowest economic growth in five years.
A fuel price hike of 3,000 rupiah in November would save the government 21 trillion rupiah in the last two months of this year, the current Finance Minister, Chatib Basri, said.
The planned fuel price hike would add an additional 3 3.5 pepatagonia black hole duffel 90l review3rcentage points to inflation this year, and the inflationary pressures would last around three months, said the deputy central bank governor Perry Warjiyo.
The current estimate for 2014 inflation is 5.3 percent.
The fuel price hike will help ease the current account deficit to below 2.9 percent of gross domestic product in 201patagonia black hole duffel 90l review15 from a projected 3.2 percent this year. Thomson Reuters journalists are subject to an Editorial Handbook which requires fair presentation and dipatagonia black hole duffel 90l review0sclosure of relevant interests.
