Indonesia to raise fuel prices amid protests

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Jakarta-filling-stationThe Indonesian government in a late-night budget session on June 17 decided to heavily raise subsidised fuel prices, a highly unpopular move in the country that has historically met with street protests.

President Susilo Bambang Yudhoyono is expected in the coming days to announce an increase in fuel prices for the first time since 2008. Subsidised gasoline prices will rise 44 per cent, from 4,500 rupiah, or 45 cents, a liter to 6,500 rupiah to help close a widening budget deficit. The revised budget also includes around 9 trillion rupiah for a cash compensation programme for poor Indonesian families to cushion the blow from the subsidy decision and a resulting increase in inflation, as was done when gasoline prices were raised in 2008.

However, in a country where half the population lives on less than $2 a day and is extremely vulnerable to increases in prices of basic goods, the fuel price hike has been immediately met with protest.

Around 4,000 protesters on June 17 staged rallies and burned tires outside the national legislative complex in south Jakarta to voice opposition to any price increases. The police said they had deployed nearly 20,000 officers to maintain order, given violent protests that had erupted during past fuel price debates.

Indonesia imports about 40 per cent of its fuel needs and the subsidies have risen with demand as global oil prices have generally climbed in recent years. Car sales reached a record 1.1 million units in 2012, more than double the total just three years earlier. Fuel subsidies rose steadily to $21.4 billion in 2012 from less than a quarter of that amount in 2009.

The Ministry of Finance has said that without raising the prices of gasoline and diesel fuel, the subsidy could rise to $25 billion this year, about 50 per cent more than the budgeted amount. The central bank says the fuel price increases will push inflation to 7.8 per cent, way beyond it 3.5-5.5 per cent target.

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Reading Time: 2 minutes

The Indonesian government in a late-night budget session on June 17 decided to heavily raise subsidised fuel prices, a highly unpopular move in the country that has historically met with street protests.

Reading Time: 2 minutes

Jakarta-filling-stationThe Indonesian government in a late-night budget session on June 17 decided to heavily raise subsidised fuel prices, a highly unpopular move in the country that has historically met with street protests.

President Susilo Bambang Yudhoyono is expected in the coming days to announce an increase in fuel prices for the first time since 2008. Subsidised gasoline prices will rise 44 per cent, from 4,500 rupiah, or 45 cents, a liter to 6,500 rupiah to help close a widening budget deficit. The revised budget also includes around 9 trillion rupiah for a cash compensation programme for poor Indonesian families to cushion the blow from the subsidy decision and a resulting increase in inflation, as was done when gasoline prices were raised in 2008.

However, in a country where half the population lives on less than $2 a day and is extremely vulnerable to increases in prices of basic goods, the fuel price hike has been immediately met with protest.

Around 4,000 protesters on June 17 staged rallies and burned tires outside the national legislative complex in south Jakarta to voice opposition to any price increases. The police said they had deployed nearly 20,000 officers to maintain order, given violent protests that had erupted during past fuel price debates.

Indonesia imports about 40 per cent of its fuel needs and the subsidies have risen with demand as global oil prices have generally climbed in recent years. Car sales reached a record 1.1 million units in 2012, more than double the total just three years earlier. Fuel subsidies rose steadily to $21.4 billion in 2012 from less than a quarter of that amount in 2009.

The Ministry of Finance has said that without raising the prices of gasoline and diesel fuel, the subsidy could rise to $25 billion this year, about 50 per cent more than the budgeted amount. The central bank says the fuel price increases will push inflation to 7.8 per cent, way beyond it 3.5-5.5 per cent target.

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