Rising oil prices to increase Indonesia's deficit: minister

15:00, January 13, 2010      

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The rising global oil price may increase Indonesia's oil subsidies, putting burdens on its budget this year, a newspaper reported here Wednesday.

Indonesian Finance Minister Sri Mulyani Indrawati was quoted by the Jakarta Globe as saying that the government expected the budget deficit in 2010 would increase from early projection of 98 trillion rupiah (some 10.68 billion U.S. dollars), or 1.6 percent of the GDP, to 128.7 trillion rupiah (some 14.02 billion U.S. dollars), or 2.2 percent of the GDP.

The minister said that Indonesia assumes the oil prices will increase from 65 U.S. dollars to 80 U.S. dollars a barrel.

If the price of crude oil averages 80 U.S. dollars a barrel this year, spending on fuel and electricity subsides would increase by an estimated 28.1 trillion (some 3.06 billion U.S. dollars) and 15.4 trillion (about 1.7 billion U.S. dollars) respectively.

In the draft budget for 2010, the government estimated fuel subsidies are at 58.9 trillion rupiah (some 6.4 billion U.S. dollars) and electricity subsidies at 40.4 trillion (about 4.4 billion U.S. dollars).

Mulyani said the government would soon submit a proposal to revise the 2010 budget to the House of Representatives for its approval.

"The priority of government policy is to maintain price stability because we want to protect people's purchasing power. Protecting people from the volatility of commodity prices is a must," she said.

The minister said rising commodity prices also meant the government might raise its 2010 inflation estimate to 5.5 percent from the current projection of 5 percent, and the central bank may raise its benchmark interest rate from 6.5 percent to 6.8 percent this year.

Crude oil for February delivery was quoted at 81.59 U.S. dollars a barrel in electronic trading on the New York Mercantile Exchange on Monday, after earlier reaching a high of 83.95 U.S. dollars a barrel, the highest since October 2008.

About 30 percent of oil consumed in the country is imported. It also uses diesel to generate electricity, although the use of diesel is currently being reduced by state power firm of PT Perusahaan Listrik Negara.

Source: Xinhua
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