JAKARTA - INDONESIAN President Susilo Bambang Yudhoyono yesterday announced further cuts in fuel prices, to take effect today.

It is the second such price reduction this month and is aimed at softening the blow of a global economic crisis and aiding the poor as the country heads towards elections next year.

Indonesia's fuel prices are heavily subsidised, putting a huge burden on state finances, but the government's decision to raise the price of subsidised fuel by an average of nearly 30 per cent in May in the face of soaring global energy prices hit DrYudhoyono's poll ratings.

He has said that he plans to run for re-election next year, when his government's track record in managing the economy, tackling graft, creating jobs and alleviating poverty will be put to the test in presidential and parliamentary elections.

The cuts in subsidised petrol and diesel fuel prices are by 9.1 and 12.7 per cent, respectively.

Petrol prices will be cut to 5,000 rupiah (S$0.68) per litre from 5,500 rupiah. Diesel will fall from 5,500 rupiah a litre to 4,800 rupiah.

The cuts follow an 8 per cent reduction in subsidised petrol prices at the beginning of this month.

US crude closed at US$46.58 last Friday, down more than US$100 (S$150) a barrel from record highs of over US$147 a barrel in July.

Dr Yudhoyono also said that inflation next year was forecast in the range of 6 to 7 per cent, which is below the central bank's range of 6.5 to 7.5 per cent.

'It is hoped that the fuel price cut will ease the burden on people and lower costs for industries,' Finance Minister Sri Mulyani Indrawati told reporters following the president's announcement.

The minister said that spending power was expected to remain steady or increase with slowing inflation, adding that the fuel price cut might help 'cushion the impact of the global economic crisis on economic growth here'.

On Dec 2, she forecast gross domestic product growth of between 4.5 and 6.0 per cent for next year.

REUTERS