$6.3b to soften blow of fuel hike

Indonesia's new government will distribute US$5 billion (S$6.3 billion) in cash to 27 million residents to soften the blow of an anticipated hike in fuel prices by as much as 55 per cent in November, a senior adviser to President-elect Joko Widodo said.

"We're going to transfer direct cash to 27 million people of Indonesia - US$5 billion for the next few months.

"This is also to control (and) manage the inflation," General Luhut Pandjaitan said at a public lecture yesterday on the policies of the new government.

Petrol is priced at just 6,500 rupiah (72 Singapore cents) a litre at pumps, cheaper than the 11,000 rupiah it costs to be produced.

Reducing the fuel subsidy is the top immediate task of the Joko administration, which aims to boost growth to more than 7 per cent by its third year, said Gen Luhut.

Indonesia spent about 200 trillion rupiah last year and plans to spend 250 trillion rupiah this year on the subsidies.

That accounts for about 30 per cent of the Budget, compared with just 16 per cent on infrastructure, said Gen Luhut.

"We don't have a choice. If we don't do this, next year we're going to have a deficit of 27 trillion rupiah just from the subsidy, and there will be another 46 trillion rupiah carried forward from this year," said Gen Luhut.

He said Mr Joko, who won the July 9 election on a populist platform, will sell the move to Indonesians with "honesty".

The president will say, said Gen Luhut, "I did it for you, for the country".

This article was first published on September 23, 2014.
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