Minister insists on fuel price hike

JAKARTA (JP): Finance Minister Prijadi Praptosuhardjo insisted on Monday that fuel prices must be increased by 20 percent in April to meet urgent budget needs, indirectly disputing a remark made earlier by Coordinating Minister for the Economy Rizal Ramli.

"Fuel prices must be increased by 20 percent or there will be grave consequences for the state budget," Prijadi told reporters on the sidelines of the inauguration ceremony for the new director general of taxes Hadi Poernomo.

"I expect the House of Representatives to approve the plan," he added.

Rizal had earlier commented that the government was undecided over the fuel price hike plan.

The Rp 41.3 trillion (US$4.3 billion) appropriation for fuel subsidies made in the current 2001 state budget had assumed that domestic fuel prices would be increased by 20 percent in April.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro also said last week that the government had not yet decided whether to raise fuel prices by 20 percent in April because the plan had not yet been approved either by the Cabinet or the legislature.

"We have completed the proposal (for the price hike), but it is not yet final. There are still other aspects to be considered," he said.

The opposing comments signal increasing differences among senior economics officials in the administration of the embattled President Abdurrahman Wahid over major economic issues.

The government had planned to cut fuel subsidies by raising fuel prices by an average of 20 percent in April this year as part of the overall strategy of eventually eliminating fuel subsidies by 2003.

The plan is also part of an agreement reached with the International Monetary Fund, which is providing a multibillion dollar bailout package for the country.

The gradual elimination of government fuel subsidies is also in line with the coming into being of the Asian Free Trade Area in 2003.

But rises in fuel prices could trigger further social and political unrest in a country already roiled by political feuding between President Abdurrahman and the majority of factions in the House.

The government raised fuel prices by an average of 12 percent in October last year. But, this had also been put back from the initial timetable which was set for April.

The government had to provide some Rp 800 billion last year to help minimize the financial burden of the fuel price hike on some 17.4 million disadvantaged families.

A hike in fuel prices in 1998 contributed to the social and political unrest that led to the downfall of the former authoritarian president Soeharto.

Elsewhere, Prijadi reiterated that the next disbursement of the IMF US$400 million loan to the country would depend on the developments in the process of amending the central bank law.

He said that the Fund was concerned that the proposed amendments would jeopardize the independent status of Bank Indonesia.

"But the problem with the fiscal decentralization policy is over," he said, pointing out that the central government had banned regional governments from incurring borrowings this year as demanded by the Fund.

The House is currently debating the government-proposed bill on the amendment of the central bank law.

The legislature had initially planned to complete the deliberation process by the middle of this month, but a Bank Indonesia official following the debates has expressed doubts about whether it could be completed as scheduled.

"There are too many amendments to be debated," the Bank Indonesia official said.

The IMF delayed in December the most recent (third) loan disbursement to Indonesia. The Fund promised in January last year to provide a total of $5 billion in loans, and has so far disbursed around $1 billion.

Separately, Dipo Alam, a senior official of the Coordinating Ministry for the Economy, said on Monday that the government was expected to complete the review of the country's economic reform program with the IMF later this month, paving the way for the disbursement of the next loan.

"Now, we only have to negotiate about the amendment of the central bank law," said Dipo, who is in charge of coordinating the talks with the IMF review team.

"The issue of fiscal decentralization has already been resolved," he added. (rei)