Indonesian leader defends fuel hike

The government raised fuel prices by almost 30 per cent prompting student protests.

    Price increases are a sensitive issue in Indonesia where many struggle to make ends meet [EPA]

    "The Friday decision to further reduce oil subsidies was the best, necessary and responsible solution to save our national economy from crumbling and protect our people from harm," Yudhoyono said.

     

    Steep hike

     

    Indonesia raised fuel prices by almost 30 per cent on the weekend, setting off angry protests in a country where millions are already feeling the brunt of the rising cost of food.

     

    The issue has proved challenging for the government ahead of next year's parliamentary and presidential elections because of the risk of widespread social unrest if fuel and food prices rise sharply.

     

    There were almost daily protests by students and workers in the run-up to the price hike, although there was no rioting.

     

    Price increases have always been a sensitive issue in Indonesia where millions live on less than $2 a day.

     

    A fuel price increase was one of the reasons for massive protests that led to the downfall of Suharto, a former Indonesian president, in 1998.

     

    Soaring global oil prices have forced Indonesia to spend billions of dollars on fuel subsidies, which the government said mainly benefit the wealthy rather than the poor.

     

    On Saturday, the government began giving out cash handouts as part of a $1.5 billion scheme intended to cushion the blow for poor families affected by the price increases.

     

    Even after the average 28.7 per cent increase, Indonesia has one of the lowest fuel prices in Asia.

    SOURCE: Agencies


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