Indonesia's new finance minister plans to cut fuel subsidy

JAKARTA (REUTERS) - Indonesia's acting finance minister said on Monday after being sworn in that he wants to cut hefty government fuel subsidies and avoid deepening the fiscal deficits in Southeast Asia's largest economy.

Chief Economic Minister Hatta Rajasa was given the additional role by President Susilo Bambang Yudhoyono on Friday. The appointment raised some concerns among the investment community over Mr Rajasa's lack of expertise in fiscal policy and it had sparked some selling on the Jakarta stock market.

Speaking at a news conference after being sworn in at the finance ministry, Mr Rajasa sought to allay those worries, saying he would maintain the pro-growth, low debt fiscal policies of his predecessor Agus Martowardojo, who will take over as head of the central bank in late May.

Mr Rajasa also alluded to the pressure the government is under to reduce its fuel subsidy, with political sensitivities heightened ahead of an election due next year.

"The subsidy must be controlled and reduced for people who can afford it. The government is looking into options to reduce the subsidy," Mr Rajasa told reporters.

Nicknamed the "Silver Fox" because of his hair, the 59-year-old Mr Rajasa is Indonesia's third finance minister in as many years, but it is unclear how long he will hold the post, with President Yudhoyono heading into the last stretch of a final term that ends late next year.

Unlike the technocrats that have usually been appointed to the finance ministry, Mr Rajasa is head of the National Mandate Party, which is part of the ruling coalition.

"His appointment... is temporary. It means nothing for us because he will only be in position for two to three months and is probably not going to take any big decisions," said Fahmi Idris, senior official with the powerful Golkar party. Others believed Mr Rajasa's close ties to Mr Yudhoyono could prove a lightning rod for criticism. His daughter is married to one of Mr Yudhoyono's sons, and there is speculation that Mr Yudhoyono favours Mr Rajasa as a candidate for the presidency once he steps aside.

"Even if he means well, Hatta is a leader of a political party and a relative of the president so any major changes will create suspicions," said Fauzi Ichsan, senior Indonesia economist with Standard Chartered Bank.