JAKARTA (Reuters) - Indonesia plans to keep electricity tariffs and fuel prices unchanged this year and the next by hiking subsidies, two cabinet ministers and a senior official said, in a move aimed at increasing the purchasing power of its citizens.
Southeast Asia’s largest economy grew 5.07 percent in 2017, its best pace in four years, but consumption - the biggest contributor to the economy - has remained sluggish at around 5 percent from its pre-financial crisis era rate of 6 percent.
“The president understands that people’s purchasing power must be kept at its current level, if not increased,” Energy Minister Ignasius Jonan told reporters late on Monday.
The government will request parliament to approve the additional spending soon, he said.
President Joko Widodo won international praise and credit rating upgrades for the country after some fuel subsidies were discarded in 2015. In the last few years, some electricity subsidies have also been phased out.
The measures have saved Indonesia billions of dollars, which were then used to build infrastructure.
In 2017, the government spent 97.6 trillion rupiah ($6.87 billion) on energy subsidies, compared with 341.8 trillion rupiah in 2014. State spending on infrastructure has risen more than 80 percent to 376.1 trillion rupiah in the same period.
The proposal to retain fuel and electricity prices at current levels will not disrupt budgetary reforms, Finance Minister Sri Mulyani Indrawati said on Tuesday, adding the budget deficit for this year could still be kept under 2.2 percent of the gross domestic product.
Ego Syahrial, director general of oil and gas at the energy ministry, said there will be no change in prices of RON 88 gasoline for 2018 and 2019. The fuel is currently not subsidised, but prices are set by the government every three months.
He also said the government will seek parliamentary approval to raise diesel subsidies to between 700 rupiah and 1,000 rupiah per litre, from the current 500 rupiah.
The energy ministry has estimated that electricity subsidies will have to be increased by around 5 trillion rupiah in 2018.
($1 = 13,758.0000 rupiah)
Reporting by Wilda Asmarini and Maikel Jefriando; Writing by Gayatri Suroyo; Editing by Biju Dwarakanath