September 18, 2014 / 4:17 AM / 3 years ago

Tackling fuel subsidies top priority for Indonesia's new govt

HONG KONG, Sept 18 (Reuters) - Indonesia’s new government plans to reduce fuel subsidies by as much as 3,000 rupiah by November to reduce its budget deficit and allocate more funds for fixing its infrastructure bottlenecks, policymakers said on Thursday.

“I think the program immediately facing is the issue of fuel subsidy and we believe we are going to tackle this very quickly,” Luhut Binsar Pandjaitan, senior advisor to President Jokowi’s team told reporters at a media briefing at CLSA’s annual conference.

“We discussed this with the team of advisors of the president-elect and we are going to hike the fuel subsidy by 3,000 rupiah by November. That can give better allocation to infrastructure,” he said.

Fuel subsidies cost the government about $20 billion a year, or nearly a fifth of its budget, and economists say they mainly benefit the rich in Southeast Asia’s largest economy.

President-elect Joko Widodo, who takes office on Oct. 20, wants to fast-track a cut in fuel subsidies that are the main reason behind a current account deficit that is expected to exceed 3 percent of gross domestic product this year.

Replying to a question from a reporter on whether the new incoming government foresees a problem from its coalition partners while tackling fuel subsidies, Pandjaitan didn’t expect any difficulties.

”Informally, I don’t see a problem with this as I discussed this with some members of Parliament and the chief of Parliament and they agreed on this,’ he said.

Pandjaitan admitted the biggest issue would be to sensitize the broader population on the issue of raising fuel prices. (Reporting by Saikat Chatterjee; Editing by Michael Perry)

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