Fuel price hike inevitable; says FM

Finance Minister Bambang Sudibyo said in Jakarta on Monday that the increase in fuel prices beginning in April this year is inevitable due to limitation to the government's sources of funds to finance the price deficit.

Speaking at a hearing with the House of Representatives (DPR), the finance minister said that the procurement costs for the fuel sales in the domestic market have increased sharply due to a continued rise in prices of crude oil in the international market while the level of the fuel prices have remained the same for more than a year.

"It is therefore inevitable to raise the fuel prices. We need an increase in order to reduce the government's subsidy," he said, adding that the level of fuel prices in Indonesia is now far lower than that in overseas and if no increase is made, it will also encourage illegal exports of Indonesian fuel products.

He said that the government allocated some Rp 18.3 trillion in the April-December state budget to subsidized the domestic fuel sales, and about Rp 1.3 trillion of the total amount would be used to help the poor directly affected by the price increase.

The minister also said that it would be impossible for the government to increase the salary of the government employees by 100 percent as demanded by legislators. The 20 percent increase proposed by the government is the most possible level at the present time, he said, adding that the 20 percent increase would be made gradually so that the hike would not pose a problem to the state budget.(*)