No hike in fuel prices in near future: Govt

JAKARTA (JP): The government will not increase fuel prices today, as outlined in the IMF-brokered reform package signed on Jan. 15, and is likely to maintain fuel subsidies for some time to curb the spiraling inflation rate and prevent possible social unrest.

Minister of Finance Fuad Bawazier said yesterday that the government would not raise fuel prices in the foreseeable future.

When asked whether prices would rise today, Fuad shook his head and said: "No, no."

Ramli Djaafar, the spokesman for state oil and gas firm Pertamina-- the sole distributor of fuel oil-- said the company had thus far not been notified by the government about any increase.

"I don't see any move indicating that the government is about to announce an increase in fuel prices tonight (last night)," Ramli told The Jakarta Post.

The government has usually announced raises in fuel prices at midnight. The last time the government increased prices was in January 1993.

Ramli, however, acknowledged that several gas stations were flooded by motorists yesterday who feared a price hike was imminent.

"We have anticipated this kind of situation, and we have supplied enough gasoline to satisfy public demand."

A reliable government source provided assurances that the government would maintain the current fuel subsidy for some time because if it was lifted in a time of economic hardship it could spark social chaos.

"The International Monetary Fund (IMF) understands this matter very well as it has experiences of this kind from some countries," the source said.

The government and IMF officials are currently renegotiating the implementation of the agreed reform package, which the government says is too tough, pointing to rising social unrest since the deal was signed in January to replace another agreement last October which the government also backed away from.

The IMF has signaled it could be flexible on the reforms, which seek to abolish monopolies, subsidies and other restrictive trade practices

Key among the reforms scheduled to be implemented today is the gradual scrapping of fuel subsidies, which analysts have warned could ultimately spur cumulative inflation this year to 50 percent.

The inflation rate for the first two months of this year has reached almost 20 percent, the highest during the New Order administration.

Under the revised 1998/1999 state budget, the government has allocated Rp 7.45 trillion (US$875 million) for fuel oil subsidies, assuming that oil prices would average $17 per barrel for the fiscal year. (aly/jsk/rid)