Indonesia fuel subsidies to grow 40 percent due to high oil prices, legislator says

The Indonesian government expects fuel subsidies to increase nearly 40 percent this year due to rising global crude oil prices, a parliament member said late Wednesday.

The fuel subsidies of 127 trillion Indonesia rupiah (US$13.9 billion) will make up about 13 percent of the country's total budget of 987.4 trillion rupiah for 2008.

The projections are based on budget revisions, due to be passed this week, that raise the assumption of the average Indonesian crude oil price to US$95 a barrel from US$80 a barrel, said Emir Moeis, the chairman of the parliament's budget committee.

The government has promised not to increase retail prices of certain petroleum products again after more than doubling them in October 2005, which sent inflation soaring and clipped economic
growth. Fuel subsidies were then making up about a quarter of the budget.

Analysts said the government is also reluctant to increase retail petroleum prices as such a move would hurt President Susilo Bambang Yudhoyono's reelection chances next year.

Global oil prices topped US$100 a barrel for the first time early this year.

Indonesia, the world's fourth most populous country, is Southeast Asia's only member of the Organization of Petroleum Exporting Countries. However, it has imported oil since 2004 because of aging fields and declining investment in exploration. (***)