Petrol prices in Bali

After an unsuccessful attempt to convince President SBY Susilo Bambang Yudhoyono to reduce government spending on fuel subsidies by the end of his term on October 20th, President-elect Joko Widodo stated that he remains committed to reducing expenditure on fuel subsidy and is prepared to take an unpopular step - raising fuel prices.

Jokowi informed journalists that during a two-hour face-to-face meeting in Bali, he "specifically requested to reduce the budget deficit by lowering fuel rates."

It is expected that the size of subsidies for the fuel sector will increase to 245 trillion rupiahs ($20.9 billion USD) this year. This is approximately 2.3 percent of GDP. By next year, forecasts suggest the amount will reach $24.9 billion, making up over 14 percent of total government expenditure.

Among the reasons for the rejection, SBY referred to the fact that the rupiah exchange rate fell by 0.2 percent to 11,701 per dollar in Jakarta at local bank rates.

Subsidies in the energy sector account for nearly one-fifth of the 2014 state budget. This is three times more than what is allocated for infrastructure development. Fuel subsidies have been a contentious issue in Indonesia for many years and have been the cause of numerous protests, conflicts, and even regime changes.

Parliament has already limited subsidized fuel supplies to 46 million kiloliters last year, but this quota is nearly depleted. Government officials recently stated that the amount of subsidized fuel could run out by early December if current spending rates persist.

Recently, the state oil and gas company PT. Pertamina began rationing subsidized fuel supplies to reduce consumption. This measure had unpleasant consequences - it sparked a frenzy of demand and long queues at gas stations across the country, prompting the measure to be reversed.

Yudhyono and Widodo have instructed their officials to continue negotiations on budgetary issues in the coming months, but Jokowi asserts that he is ready to take the politically unpopular step of cutting fuel subsidy expenditures and redirecting these funds to areas such as education, healthcare, and agriculture.

"I am prepared to be unpopular, but people need to know that we must spend money on more pressing needs," Widodo told journalists in Jakarta.