Indonesia hikes fuel prices to rein in subsidies

STORY: In a controversial move, Indonesia raised subsidized fuel prices by about 30 percent on Saturday (September 3).

While the decision risks mass protests, it’s an attempt to rein in ballooning subsidies.

President Joko Widodo - also known as Jokowi - said the price hike was the government's 'last option' in a 'difficult situation’.

Announcing the decision during a televised news conference, he added the budget for subsidies had tripled and will continue to increase.

The change will have major implications for households and small businesses.

Ride-hailing apps drivers said the fuel hike could mean their income will become even lower as the country's economy slowly recovers to its pre-pandemic level.

Although Indonesia is southeast Asia’s largest economy, it has been hit by rising global oil prices and a depreciating currency.

This year already it has increased its 2022 energy subsidies to three times the original budget.

Fuel prices are politically sensitive in Indonesia as subsidized fuel accounts for more than 80% of state-owned oil giant Pertamina's sales.

The last fuel price hike was in 2014, months after Jokowi took office, aiming to free up fiscal space.

It sparked protests across the archipelago.

The opposition Labour Party has arranged a protest on Tuesday involving thousands of workers, its chairman Said Iqbal told Reuters.

Iqbal, who also heads a trade union, has called on parliament to pressure the government into canceling the price hike.