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Newly-sworn in president of Indonesia, Joko Widodo (popularly known as Jokowi), has announced a hike in the republic’s subsidised fuel prices effective today. Petrol is now priced at 8,500 rupiah (RM2.35) a litre, and diesel at 7,500 rupiah (RM2.07) a litre, Antara reports.

The original prices were 6,500 rupiah (RM1.80) for petrol and 5,500 rupiah (RM1.52) for diesel, so this represents a significant 30% hike. Kerosene maintains status quo at 2,500 rupiah (69 sen) a litre.

In Indonesia, only RON 88 petrol is subsidised, and it’s sold only through Pertamina, the national oil and gas company. Premium RON 92 and super-premium RON 95 petrol are also available, but they are not subsidised. The price of unsubsidised RON 92 petrol is currently 11,800 rupiah (RM3.26) a litre.

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The Indonesian government will compensate the low-income groups by providing them with Prosperous Family Cards, Indonesia Health Cards, and Indonesia Smart Cards, Antara reports.

“The move is aimed at maintaining the purchasing power of the people and encouraging them to carry out business undertakings in productive sectors,” Jokowi said, adding that a significant amount of funds that could benefit infrastructure, education and health services went instead to subsidising fuel.

“The decision to divert fuel subsidy to productive sectors (from consumptive sectors) is aimed at creating funds that are used more effectively for all of Indonesia,” he said.

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The fuel price jump is expected to save the government around 100 trillion rupiah (RM276 billion), as well as contribute 2% to inflation, possibly pushing it up to 7.3% this year, Jokowi said. He added that he hoped the 2015 budget deficit target, set at 2.2% of the GDP, can be lowered following the hike.

The new minority coalition government is dealing with a US$23 billion (RM75.48 billion) fuel subsidy bill – Indonesia’s biggest fiscal problem.

According to Reuters, petrol prices in the republic went up by 44% in 2013, but despite a weakening fiscal position, outgoing president Susilo Bambang Yudhoyono avoided ordering another hike this year.