Minister insists on fuel price hike

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)