Indonesia’s Jokowi mulls limiting subsidised fuel and raising gas price, but despite his popularity, it won’t be easy

‘Maintaining the energy subsidy is a heavy task. How long can we go on like this?’ the president said this week

While his approval ratings are high, experts say limiting subsidies or recipients of them will be difficult, with rich still accessing cheaper fuel

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A petrol station employee fills up a motorcycle for a customer in Jakarta. File photo: Reuters

Published: 7:00pm, 19 Aug 2022

Indonesia’s President Joko Widodo is considering limiting the consumption of subsidised fuel, as well as a gas price hike, to reduce the burden posed by the inflated energy subsidy on the nation’s budget.

Analysts say his high approval ratings mean he has the political capital to take the plunge, although doing so will be far from easy.

This year, Jakarta allocated 502 trillion rupiah (US$33.94 billion), up from last year’s 170 trillion rupiah, to maintain the prices of petrol, diesel, and electricity amid rising crude oil prices, a strategy Widodo earlier this month claimed was a “bold move” as “no other countries dare to provide [energy subsidies] as high as Indonesia”.

But his tone has changed in recent days as he ponders the pros and cons of a gas price hike on economic growth. In an inflation-focused meeting with his subordinates on Thursday, he said: “Maintaining the energy subsidy is a heavy task. How long can we go on like this?”

In an interview with CNBC Indonesia, also on Thursday, Widodo acknowledged that reducing the fuel subsidy “would carry risks” to growth in Southeast Asia’s biggest economy. “If we play it out according to the market, our inflation rate would explode,” he said.