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May 6, 2008

Fuel prices to go up to save budget

Indonesia confirmed Monday it will raise its subsidised fuel prices to protect the state budget from the soaring price of oil, reported AFP.

“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 was quoted by AFP as saying.

He did not indicate 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.

Rising fuel prices helped drive Indonesia's inflation rate to 8.96 percent in April, its fastest rise in more than 18 months.

Indonesia's ballooning fuel subsidies are putting pressure on the budget and draining funds away from spending on the poor and crumbling infrastructure.

The subsidies have become increasingly expensive as the price of oil has surged.

Fuel subsidies this year are projected to nearly triple to 126.8 trillion rupiah ($13.8 billion), or about 12 percent of the state budget, based on a revised oil price of $95 per barrel.

President Susilo Bambang Yudhoyono said earlier Monday that the question was no longer whether prices would be raised, but by how much.

“We are not at the stage of talking about whether to raise it or not, but which commodities should be increased and whether it will be 20, 25 or 30 percent ...,” he said.

Officials have been widely reported to be discussing a rise of almost 30 percent for premium gasoline to 6,000 rupiah (65 cents), compared with the current 4,500 rupiah.

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