Subsidized Fuel Imports Still a Big Challenge, says BI

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  • TEMPO.CO, JakartaBank Indonesia (BI) said that imports of subsidized fuels (BBM) are still a big challenge in the efforts to reduce current account deficit, as reported by Antara News.

    "Improvement made in exports should result in improvement in current account balance, but the problem remains because of large imports of BBM," Governor of the central bank Agus Martowardojo said on Friday.

    The government, therefore, has sought to reduce consumption of subsidized BBM, in a bid to reduce imports of BBM, Agus said.

    BBM imports may have to exceed quota without a concrete attempt to cut consumption, he said.

    By July this year, consumption of subsidized automotive diesel oil already reached 9.12 million kiloliters or 60 percent of the target set in the revised 2014 state budget and consumption of premium gasoline reached 17.08 million kiloliters or 58 percent of the target.

    He said he welcomed the result of re-negotiations with more than 100 mineral producers holding contract of work including PT Freeport Indonesia , the countrys largest producer of copper concentrate.

    Under the agreement the miners will be allowed to resume exports of mineral ores on certain conditions including guarantee that they would build smelters to process their mineral ores.

    Exports of mineral ores are banned in January, 2014 under the law on coal and minerals. The policy is aimed at promoting processing industry.

    Freeport already resumed exports on Thursday shipping 11,000 tons of copper concentrate to China.

    It was the first shipment after the implementation of the law on January 12, 2014.

    The US company signed a memorandum of understanding with the government on July 25 after paying a certain amount of fund to the government as a guarantee that it would but build its own smelter.

    Next week, Freeport plans to export 50,000 tons more of copper concentrate to Spain.

    Trade Minister Muhammad Lutfi said state revenues from the exports would reach around US$2 billion, a significant contribution to trade balance.

    Finance Minister Chatib Basri said with the resumption of exports of mineral ores, would greatly help cut deficit in the countrys current account balance.