Indonesia to Raise Fuel Price After Mid-June Budget Revision

Indonesia’s government will increase subsidized fuel prices after completing its 2013 budget revision by June 17, the economy minister said, reaffirming its determination to improve state finances.

“The problem of whether to raise the price or not, it’s not an issue anymore, we already know that we have to do that,” Coordinating Minister for the Economy Hatta Rajasa told reporters in Jakarta today. Once the revised budget is “done we’ll go ahead,” he said.

President Susilo Bambang Yudhoyono has put off raising fuel prices since protests derailed a planned increase last year in a country where riots spurred by soaring living costs helped oust dictator Suharto in 1998. Curbing the government’s energy subsidies would reduce trade and current-account deficits that have led investors to push down the rupiah, sell stocks and avoid local bonds in the past week.

The trade deficit could reach as much as $3 billion this year without a fuel-price increase, Trade Minister Gita Wirjawan said today. Yudhoyono is seeking fuel-subsidy cuts to free up funds for infrastructure and spur growth, after limiting the use of partially government-funded diesel earlier this year.

Inflation may quicken to 7.7 percent should the government raise fuel prices, compared with about 5.5 percent without an increase, Bank Indonesia Deputy Governor Halim Alamsyah said on June 3.

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