According to Bloomberg’s Sharon Chen and Novrida Manurung, Indonesian President Susilo Bambang Yudhoyono is under growing pressure to raise fuel prices and curb oil imports as currency risks persist and the window to act narrows ahead of elections in 2014.
The government will probably need to increase subsidized- fuel prices this year, according to economists at Bank of America Corp., Australia & New Zealand Banking Group Ltd., Standard Chartered Plc, PT Bank Danamon Indonesia and Moody’s Analytics. The country limited the use of partially government- funded diesel last week and the trade minister said Yudhoyono will evaluate energy charges in the next few weeks.
The president has avoided raising fuel prices since protests derailed an increase early last year, highlighting the political minefields in a country where riots spurred by soaring living costs helped oust the dictator Suharto in 1998. Subsidies that keep charges below international market rates have bolstered demand for energy imports in the world’s fourth most- populous nation, contributing to a widening current-account gap and a 5.9 percent drop in the rupiah last year.
“This is a dilemma for the president,” said Fauzi Ichsan, a Jakarta-based senior economist at Standard Chartered and a former Finance Ministry analyst. “If the president raises fuel prices, it won’t be good politically, yet without an increase, the current-account deficit will remain high and the rupiah will continue to decline, adding imported inflation.”