Indonesia Expects to Overshoot Subsidy Budget by Rp 100 Trillion

By webadmin on 07:14 pm Jul 06, 2012
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The Indonesian government expects fuel subsidy spending to swell to as much as Rp 216.8 trillion ($23 billion) this year, or more than 50 percent higher than the amount allotted in the state budget.

Finance Minister Agus Martowardojo said in a press statement on Friday that the government spent Rp 88.9 trillion, or 64 percent of this year’s allocated fuel subsidy spending of Rp 137.4 trillion, in the first semester alone.

The second semester’s spending is estimated to reach Rp 127.9 trillion.

“Thus the realized spending by the end of the year is estimated to reach Rp 216.8 trillion,” Agus said.

He added that electricity subsidy spending was also expected to swell from Rp 65 trillion set in the revised 2012 state budget to Rp 89.1 trilion.

In the first semester of the year alone, Agus said, the government spent Rp 35.5 trillion for power subsidies. The amount is estimated to reach Rp 53.7 trillion in the second semester.

Agus attributed the swelling spending to the increase in the Indonesian Crude Price and the declining rate of the rupiah against US dollar, among other factors.

The House of Representatives in March rejected the government’s proposal for a 33 percent increase in subsidized fuel prices to Rp 6,000 a liter from the current Rp 4,500, which would have gone into effect on April 1.

Instead, lawmakers agreed to allow the price increase only in the event that the six-month average price of Indonesian crude oil exceeded the state budget assumption of $105 a barrel by 15 percent, which means an average price of $120 a barrel. That condition has not yet been met.
But even without the subsidized fuel price rise, the government said in June it was still targeting to save Rp 5 trillion in its subsidy budget.

However, even with the ballooning subsidy spending, the projected budget deficit for the year will still not exceed the 3 percent allowed by law.

Investor Daily