Indonesia budget highlights fuel subsidy challenge | The Daily Star
12:00 AM, August 18, 2014 / LAST MODIFIED: 01:53 AM, March 08, 2015

Indonesia budget highlights fuel subsidy challenge

Indonesia budget highlights fuel subsidy challenge

Energy subsidies are set to eat up a huge chunk of the Indonesian budget again next year, the president said Friday, highlighting the challenge for incoming leader Joko Widodo to reduce the crippling payouts.

At current rates, fuel and electricity subsidies are expected to cost 363.5 trillion rupiah ($31.3 billion), up slightly from this year, according to a draft budget for 2015 presented by President Susilo Bambang Yudhoyono.

That is around 18 percent of the budget, with fuel subsidies the main drain on state coffers.

The subsidies are historically a tense political issue in Indonesia, where fuel price hikes to reduce the payouts have been met with massive protests and caused divisions between coalition partners in government.

But economists say cutting the subsidies is vital, as they are a major drain on the economy, taking money away from other areas where it is sorely needed.

They have also been criticised as being poorly targeted, as they give the rich as much of a discount on fuel as the poor.

Yudhoyono, who will step down as president in October after serving a maximum of two terms, has made some limited cuts during his tenure but has been criticised for not going nearly far enough.

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