Govt Mulls Fixed Fuel Subsidy Policy

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  • TEMPO.CO, Jakarta - The government considers applying a fixed fuel subsidy policy in 2015, where subsidies will no longer refer to the crude oil price movements and rupiah exchange rate against the US dollar as it does now.

    The application of fixed will guarantee the reallocation of subsidy budgets to more productive sectors, said Finance Minister Bambang Brodjonegoro at Tempo's editorial office last night.

    "So when exchange rates and oil prices move, inflation can be maintained," said Bambang.

    In addition to inflation considerations, Bambang said, fuel subsidy allocation proposals in the past, which were always revised mid-year, showed lack of credibility in budget planning. "Later, with a fixed subsidy model, subsidy leaps from the original plan will not happen again."

    The minister is optimistic that the government's strong commitment to reduce fuel subsidies would encourage more positive economic growth projections next year, as "investors' confidence (will) grow."

    The transfer of fuel subsidy, said Bambang, will also lower the Gini ratio, which represents income disparity between the rich and the poor, which has continued to increase over the past ten years.