Jakarta - Increases in fuel prices often trigger public controversy.\nIn Indonesia\u2019s history, the government once raised fuel prices after\nreceiving advice from the International Monetary Fund (IMF).<\/p>\n
This occurred in 1998 when Indonesia was facing a severe monetary\ncrisis that began with turmoil in the Thai Baht. According to Jan Luiten\nvan Zanden in Ekonomi Indonesia 1800-2010 (2012), the crisis caused the\nrupiah exchange rate, previously around Rp2,000 per US dollar, to plunge\nto around Rp10,000-16,000 per US dollar.<\/p>\n
Consequently, the prices of basic necessities rose, causing public\nsuffering. To overcome the crisis, the government accepted IMF\nassistance. On 15 January 1998, Indonesia agreed to a Letter of Intent\n(LoI) signed by President Soeharto and the IMF.<\/p>\n
One of the key points in the IMF programme was the reduction of\nenergy subsidies. The IMF stated the government needed to adjust\nstate-controlled prices to ease the fiscal burden. \u201cTo reduce economic\ndistortions and strengthen the fiscal position, the government intends\nto adjust administered prices with the aim of gradually eliminating fuel\nand electricity subsidies,\u201d the IMF wrote in the document.<\/p>\n
This recommendation was subsequently implemented by the government\nthrough increases in fuel prices and electricity tariffs. Based on\nreporting by Kompas (4 May 1998), the government announced an average\nfuel price increase of 46.3%, whilst electricity tariffs rose by up to\n60%.<\/p>\n
Through Presidential Decree No.\u00a069 of 1998, Soeharto then declared\nthat from 5 May 1998 at 00.00 WIB, the price of Premium rose to Rp1,200\nper litre, kerosene to Rp350 per litre, and diesel to Rp600 per litre.\nThe increase immediately spread to various economic sectors, including\npublic transport fares and the prices of basic necessities.<\/p>\n
However, the policy intended to improve the fiscal condition instead\nsparked public anger. Amid an economic situation already depressed by\nthe crisis, the fuel and electricity price hikes worsened the burden on\npeople\u2019s lives.<\/p>\n
Economist Boediono in Ekonomi Indonesia Dalam Lintasan Sejarah (2016)\nnoted that after the IMF programme was implemented, Indonesia was\nactually dragged further into economic and political crisis. Instead of\naccelerating recovery, the reduction of fuel subsidies helped trigger\nsocial unrest that further worsened the national situation.<\/p>\n
The growing wave of protests eventually culminated in a political\ncrisis. Only a few weeks after the fuel price increase, Indonesia was\nrocked by major riots in May 1998 that led to Soeharto\u2019s resignation on\n21 May 1998, ending his 32-year rule.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/due-to-this-institutions-advice-indonesias-president-raised-fuel-prices-1781160883", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }