Government will not raise fuel prices, Boediono says
<p>Government will not raise fuel prices, Boediono says</p><p>The Jakarta Post, Jakarta</p><p> Minister of Finance Boediono indicated on Friday that the
government would not increase domestic fuel prices despite the
current sharp rise in the international price of oil.</p><p>"We will peg domestic fuel prices (at a certain level) so as
not to jeopardize the economy and not place an additional burden
on the public. But consequently, the (fuel) subsidy will have to
be increased. That's what we have to prepare for," he told
reporters.</p><p>Fears over a possible U.S.-led military strike on Iraq have
sent the price of oil climbing to above US$35 per barrel, much
higher than the government's target of $22 per barrel under the
2003 state budget.</p><p>This has led to speculation that fuel prices in the domestic
market will be raised to better reflect international prices.</p><p>Separately, Vice President Hamzah Haz was quoted by Antara as
saying on Friday that the government would not raise domestic
fuel prices unless the international oil price jumped to $50 per
barrel.</p><p>"The government will try to maintain the (fuel) prices (at
current levels). We have not yet considered raising them," he
said.</p><p>The government was forced to cancel a fuel price hike earlier
this year following widespread protests from various groups.</p><p>Increasing fuel prices is a sensitive political issue in this
country as such a move triggers higher prices for other
commodities and services, hurting both lower-income groups and
business.</p><p>But Boediono said that keeping domestic fuel prices low would
require a greater government subsidy.</p><p>As set out in this year's state budget, the total allocation
for fuel subsidies is earmarked at Rp 13.3 trillion (about $1.5
billion).</p><p>Boediono did not elaborate as to how much money would have to
be allocated to cover the higher-than-expected subsidy spending,
saying that the calculations had yet to be finalized.</p><p>Boediono said he would make sure, however, that all the
necessary calculations would have been completed by the time the
government submitted its budget-implementation report to the
House of Representatives sometime in the middle of this year.</p><p>According to the prevailing regulations, after the first
semester of the fiscal year the government has to report to
legislators on the implementation of the state budget and whether
any adjustments are needed to the basic budget assumptions --
including oil prices.</p><p>"Yes, there will be revisions, but we need to calculate them
first. They will all have been completed by the time we submit it
(the first semester report) to the House," he said.</p><p>In contrast to the issue of higher fuel subsidies, the
government is actually enjoying windfall profits from
skyrocketing international oil prices as the country is also an
oil exporter.</p><p>The country imports a certain amount of crude oil to produce
local fuel products.</p><p>Boediono declined to say how much the expected windfall gains
from oil would amount to this year.</p>
government would not increase domestic fuel prices despite the
current sharp rise in the international price of oil.</p><p>"We will peg domestic fuel prices (at a certain level) so as
not to jeopardize the economy and not place an additional burden
on the public. But consequently, the (fuel) subsidy will have to
be increased. That's what we have to prepare for," he told
reporters.</p><p>Fears over a possible U.S.-led military strike on Iraq have
sent the price of oil climbing to above US$35 per barrel, much
higher than the government's target of $22 per barrel under the
2003 state budget.</p><p>This has led to speculation that fuel prices in the domestic
market will be raised to better reflect international prices.</p><p>Separately, Vice President Hamzah Haz was quoted by Antara as
saying on Friday that the government would not raise domestic
fuel prices unless the international oil price jumped to $50 per
barrel.</p><p>"The government will try to maintain the (fuel) prices (at
current levels). We have not yet considered raising them," he
said.</p><p>The government was forced to cancel a fuel price hike earlier
this year following widespread protests from various groups.</p><p>Increasing fuel prices is a sensitive political issue in this
country as such a move triggers higher prices for other
commodities and services, hurting both lower-income groups and
business.</p><p>But Boediono said that keeping domestic fuel prices low would
require a greater government subsidy.</p><p>As set out in this year's state budget, the total allocation
for fuel subsidies is earmarked at Rp 13.3 trillion (about $1.5
billion).</p><p>Boediono did not elaborate as to how much money would have to
be allocated to cover the higher-than-expected subsidy spending,
saying that the calculations had yet to be finalized.</p><p>Boediono said he would make sure, however, that all the
necessary calculations would have been completed by the time the
government submitted its budget-implementation report to the
House of Representatives sometime in the middle of this year.</p><p>According to the prevailing regulations, after the first
semester of the fiscal year the government has to report to
legislators on the implementation of the state budget and whether
any adjustments are needed to the basic budget assumptions --
including oil prices.</p><p>"Yes, there will be revisions, but we need to calculate them
first. They will all have been completed by the time we submit it
(the first semester report) to the House," he said.</p><p>In contrast to the issue of higher fuel subsidies, the
government is actually enjoying windfall profits from
skyrocketing international oil prices as the country is also an
oil exporter.</p><p>The country imports a certain amount of crude oil to produce
local fuel products.</p><p>Boediono declined to say how much the expected windfall gains
from oil would amount to this year.</p>