Next government will raise fuel prices next year
Next government will raise fuel prices next year
Zakki P. Hakim, The Jakarta Post/Jakarta
The two presidential candidates and their running mates were
forced to address what may be the toughest economic challenge
next year -- raising fuel prices at home -- when they met a group
of economists during a televised dialogue late on Wednesday.
Presidential candidate Susilo Bambang Yudhoyono acknowledged
he might have to cut the costly fuel subsidies and consequently
raise fuel prices next year if international oil prices remained
high.
Responding to a question from panelist Lin Che Wei, Susilo,
who has so far been leading in the opinion polls, said that
cutting the subsidies was crucial to avoiding fiscal disaster.
But he was quick to add that any cut in the fuel subsidy would
not cause suffering for low-income people.
"We aim to apply a targeted subsidy," said Susilo, who got the
chance to go first during the second day of a two-day dialog.
Meanwhile, President Megawati Soekarnoputri failed to give a
direct answer when panelist Mari E. Pangestu raised the same
question, saying that the next government would have to face the
tough reality that oil prices would not decline to below $30 per
barrel in the near future (the Megawati government has proposed
what many see as an unrealistic oil price assumption of $24 per
barrel and higher fuel subsidy spending of Rp 36 trillion in the
2005 draft state budget.
However, Mega's running mate, Hasyim Muzadi, acknowledged that
the next government would eventually have to adopt the
politically unpopular measure of cutting subsidies due to budget
constraints.
"Subsidies will be removed, although gradually, and there will
be compensation (for low income people)," said Hasyim, who seemed
to be more confident in answering questions than his would-be
boss.
Renewed debate on whether the government should continue with
the current expensive fuel subsidy has recently emerged after oil
prices soared to record levels of more than US$45 per barrel,
which may force the government to boost this year's fuel subsidy
by 344 percent to Rp 63 trillion from the initial allocation of
Rp 14.5 trillion (by comparison, development spending in the
current state budget is Rp 67 trillion)
The current government has decided not to raise fuel prices
this year due to the fear of social and political unrest during
the current election season (former authoritarian president
Soeharto was forced to step down partly due to his decision --
under pressure from the IMF -- to raise fuel prices). But critics
say that the fuel subsidies mainly benefit car owners, and that
the huge sums involved would be better allocated on other
purposes, such as education or defense.
Susilo and his running mate Jusuf Kalla, and Mega and her
partner Hasyim presented their economic platforms separately.
As in the first day of the dialogue, the limited time allowed
to the panelists to ask questions and to the candidates to
respond left the studio audience and television viewers with more
questions than answers.
But, basically, the two pairings promised economic measures
that would boost growth, create more employment, protect farmers,
and boost the role of small and medium enterprises in the
economy.
Zakki P. Hakim, The Jakarta Post/Jakarta
The two presidential candidates and their running mates were
forced to address what may be the toughest economic challenge
next year -- raising fuel prices at home -- when they met a group
of economists during a televised dialogue late on Wednesday.
Presidential candidate Susilo Bambang Yudhoyono acknowledged
he might have to cut the costly fuel subsidies and consequently
raise fuel prices next year if international oil prices remained
high.
Responding to a question from panelist Lin Che Wei, Susilo,
who has so far been leading in the opinion polls, said that
cutting the subsidies was crucial to avoiding fiscal disaster.
But he was quick to add that any cut in the fuel subsidy would
not cause suffering for low-income people.
"We aim to apply a targeted subsidy," said Susilo, who got the
chance to go first during the second day of a two-day dialog.
Meanwhile, President Megawati Soekarnoputri failed to give a
direct answer when panelist Mari E. Pangestu raised the same
question, saying that the next government would have to face the
tough reality that oil prices would not decline to below $30 per
barrel in the near future (the Megawati government has proposed
what many see as an unrealistic oil price assumption of $24 per
barrel and higher fuel subsidy spending of Rp 36 trillion in the
2005 draft state budget.
However, Mega's running mate, Hasyim Muzadi, acknowledged that
the next government would eventually have to adopt the
politically unpopular measure of cutting subsidies due to budget
constraints.
"Subsidies will be removed, although gradually, and there will
be compensation (for low income people)," said Hasyim, who seemed
to be more confident in answering questions than his would-be
boss.
Renewed debate on whether the government should continue with
the current expensive fuel subsidy has recently emerged after oil
prices soared to record levels of more than US$45 per barrel,
which may force the government to boost this year's fuel subsidy
by 344 percent to Rp 63 trillion from the initial allocation of
Rp 14.5 trillion (by comparison, development spending in the
current state budget is Rp 67 trillion)
The current government has decided not to raise fuel prices
this year due to the fear of social and political unrest during
the current election season (former authoritarian president
Soeharto was forced to step down partly due to his decision --
under pressure from the IMF -- to raise fuel prices). But critics
say that the fuel subsidies mainly benefit car owners, and that
the huge sums involved would be better allocated on other
purposes, such as education or defense.
Susilo and his running mate Jusuf Kalla, and Mega and her
partner Hasyim presented their economic platforms separately.
As in the first day of the dialogue, the limited time allowed
to the panelists to ask questions and to the candidates to
respond left the studio audience and television viewers with more
questions than answers.
But, basically, the two pairings promised economic measures
that would boost growth, create more employment, protect farmers,
and boost the role of small and medium enterprises in the
economy.