Seems we’re not the only ones in the region planning to rationalise fuel subsidies of late – according to Reuters, Indonesia’s new government is set to make changes to its petrol and diesel subsidies before the end of the year.

The republic’s chief economics minister Sofyna Djalil told the news agency that the government is planning a fuel price hike of 3,000 rupiah (RM0.82) for possibly as early as November 1, and that policy correction will be done before the year is up at the latest.

Djalil, an advisor to newly-sworn in President Joko Widodo (popularly known as Jokowi), had said before that the current subsidies were not reaching their intended target group, but declined to comment further this time, Reuters reports.

The new minority coalition government has to deal with a US$23 billion (RM75.48 billion) fuel subsidy bill – Indonesia’s biggest fiscal problem. The subsidy regime is the main contributor to the budget and current account deficits faced by South East Asia’s biggest economy.


Finance minister Bambang Brodjonegoro told Reuters that the trade ministry will introduce policies to curb any rise in inflation, and that sections of society most affected by any subsidy changes will be compensated for.

According to the news agency, petrol prices went up by 44% last year, but outgoing president Susilo Bambang Yudhoyono avoided ordering another hike this year, despite a weakening fiscal position.

Officials within Jokowi’s government have said that any money saved from reduced subsidies would be spent on projects in areas such as infrastructure, agriculture, education, and health.

Meanwhile, it was reported recently that the auto industries of Malaysia and Indonesia could collaborate on an ASEAN car, and that Proton is expected to be involved. Jokowi was said to have expressed interest in the project.