JAKARTA - INDONESIA confirmed on Monday it will raise its subsidised fuel prices to protect the state budget from the soaring price of oil.

'We will raise the subsidised fuel price within the limits which people can afford. We're now working on that and we'll announce it to the public later,' Coordinating Minister for the Economy Boediono told reporters.

He gave no indication of the size of the price hikes, which are likely to further fuel inflation in Southeast Asia's biggest economy ahead of parliamentary elections next year.

The decision to cut subsidies that keep gasoline, diesel fuel and kerosene affordable to the country's millions of poor risks nationwide demonstrations and political opposition from parties jockeying for position ahead of elections next year.

The government last raised prices in 2005, defying protests and winning praise from international donors. To cushion the blow, it provided direct cash payments to the poor - a policy it is sure to repeat this time around.

President Susilo Bambang Yudhoyono was quoted earlier by the state news agency Antara as saying the government was no longer debating whether to raise prices, but rather by how much and when.

The discussion now is 'whether it will be 20, 25 or 30 per cent and why will it be that', he was quoted as saying. He added that a decision would be taken 'quickly'.

It was the first time he has endorsed a second major subsidy cut.

Any price hike is sure to trigger inflation in the country of 235 million people and risk hurting economic growth as its poorest citizens struggle to afford rice and other staples amid rising food costs.

Still, most in Indonesia agree the current level of fuel subsidies are unsustainable as global prices hover around US$117 a barrel.

Critics note they are also enjoyed by many of its wealthiest citizens, who currently spend just under half a dollar for a liter of gasoline for their cars.

Indonesia is Southeast Asia's largest oil producer and a member of Opec, but it has to import oil because of decades of declining investment in exploration and extraction.

A big fuel price increase in 1998 triggered rioting that helped topple former dictator Suharto. Protests also forced former President Megawati Sukarnoputri to scale back a fuel price increase in 2002. -- AP, AFP