Indonesian president looks to lower fuel prices to boost domestic spending

Indonesia's President Joko Widodo at a cabinet meeting at the presidential palace in Jakarta, Indonesia, on Sept 29, 2015.
Indonesia's President Joko Widodo at a cabinet meeting at the presidential palace in Jakarta, Indonesia, on Sept 29, 2015.PHOTO: REUTERS

JAKARTA (REUTERS) - Indonesia's President Joko Widodo will seek to encourage reductions in fuel prices and bank lending rates as part of a package of policy reforms due to be announced next week, according to his cabinet secretariat.

The government rolled out two earlier sets of measures last month as part of a strategy to halt a slowdown and boost purchasing power in Southeast Asia's biggest economy, after it grew 4.67 per cent in the second quarter - the slowest pace since 2009. "There's a possibility (fuel prices) will be reduced. This is still being calculated," Widodo told reporters on Friday.

A statement on the cabinet secretariat's website said Widodo told his ministers late on Thursday that he wanted to see reforms that would immediately benefit ordinary people and the business community.

"There needs to be a short-term stimulus and incentives in the medium and long-term so that it can be felt immediately by businesses and the people," the president said, according to the statement.

Energy minister Sudirman Said told Reuters on Friday (Oct 2) his ministry and state energy firm Pertamina were studying the president's request to lower fuel prices.

According to the cabinet secretariat, the president also called for lower bank lending rates - currently among the highest in the region - to boost private consumption, which represents more than half the gross domestic product.

Other policies set to be rolled out next weekspeeding up the time it takes to get business permits and accelerating labour-intensive projects to counteract a loss of jobs in the manufacturing and mining sectors.

Widodo made a bold move at the beginning of the year by scrapping fuel subsidies, saving the government billions of dollars that the president promised to use for infrastructure.

But sluggish government spending and a lack of policy coordination have held up projects and dampened investor sentiment.