RI could cut compensation for the poor amid rising fuel costs
RI could cut compensation for the poor amid rising fuel costs
Agence France-Presse
Jakarta
Indonesia could be forced to cut back on a state funded
compensation scheme for the poor which was supposed to compensate
for a reduction in fuel subsidies planned for October, a report
said on Friday.
State Minister of National Development Planning Sri Mulyani
Indrawati said Jakarta had planned to spend Rp 9.3 trillion (Rp
910 million) on cash payments to some 15.5 million poor
households under the scheme.
But she said delays in deciding when and how to reduce fuel
subsidies -- expected to cost Indonesia up to $14 billion this
year -- meant the government was finding it difficult to raise
the funds.
"Our budget will provide us with many, many more constraints,"
she said in an interview with the Financial Times. "I do believe
that we may not have more than Rp 6 trillion."
A reduction of the politically-sensitive subsidies could
trigger further criticism against President Susilo Bambang
Yudhoyono who has delayed any increase in fuel prices until
October.
Calls for a reduction in costly fuel subsidies have
intensified recently as global oil prices struck record highs
placing a huge burden on the government's budget and resulting in
a sharp fall in the local currency.
A cut in fuel subsidies would raise the cost of living for
Indonesia's impoverished millions and the compensation scheme was
expected to address the financial imbalance.
Mulyani said the government had brought forward its original
plan to roll out the compensation package and the fuel price
rises together in January.
But the government, she said, was now working towards making
the first round of cash disbursements to the poor by the third
week of October, ahead of the Islamic Idul Fitri holiday in
November.
That schedule was ambitious, she admitted, but added that
Indonesia was "quite confident in terms of our ability to
mobilize the system."
Mulyani said the specifics were still being discussed although
it would come alongside the long-delayed roll-out of education,
health, and rural development programs that were announced with a
March increase in fuel prices.
The initial target, she said, was to make payments of Rp
600,000 -- roughly Indonesia's monthly minimum wage to 15.5
million households -- or about 62 million people, at a total cost
of Rp 9.3 trillion.
In a related development, the international ratings agency
Standard and Poor's on Friday downgraded Indonesia's rating
outlook to stable from positive.
The agency said it affirmed its 'B+' long-term foreign and its
'BB' long-term local currency sovereign credit ratings on
Indonesia.
It also affirmed its 'B' short-term sovereign credit ratings
on Indonesia.
The outlook change reflected increasing concern by the agency
over the apparent inability and unwillingness of the Indonesian
authorities to address the underlying problems behind the rupiahs
recent rapid depreciation.
"Policy responses to renewed bouts of currency weakness have
tended to be slow, reactive, and incremental over the past year,"
said Standard and Poors credit analyst Agost Benard.
"In a rapidly evolving environment such as that which we are
facing in the global energy markets, the inability to craft and
implement appropriate policy measures leaves fiscal and external
balances exposed.
"This could ultimately threaten to undo the macroeconomic
stability achieved in recent years," he said.