Jakarta calculating cost of keeping fuel prices unchanged: Jokowi

JAKARTA • Indonesia's President has said his government is calculating how much longer it can sustain a policy of keeping fuel prices unchanged, while the central bank governor hinted at keeping rates steady at an upcoming policy review.

President Joko Widodo signalled earlier this week that the government is considering raising fuel prices. He has repeatedly said the energy subsidy budget, which has been tripled to 502 trillion rupiah (S$47 billion) this year, is too large.

"This is such a large figure and we must know what this is for: to hold back a steep rise in inflation," the President, popularly known as Jokowi, told a national coordinating meeting on inflation management yesterday.

"But can the state budget be strong enough to continue? We are calculating," he said.

Inflation in South-east Asia's largest economy rose to a seven-year high of 4.94 per cent last month, due to rising prices of food and some non-subsidised fuels.

Officials with Bank Indonesia (BI) have played down the rise in headline inflation level, saying they prefer to determine monetary policy based on the core inflation rate, which is still below 3 per cent.

"We, for the time being, do not need to raise interest rate because of the subsidies and food management," said BI governor Perry Warjiyo after the coordinating meeting, repeating that he sees "no need to rush to raise interest rate".

BI, one of a few Asian central banks that have not lifted rates from pandemic-era levels, is due to review its monetary policy next week.

Indonesians now pay 7,650 rupiah per litre for subsidised petrol, which the authorities say is about 40 per cent below estimated market price. Subsidised diesel is sold at 5,150 rupiah per litre, less than a third of market price.

REUTERS