Indonesia is handing out US$1.5 billion in cash to its poorest residents to soften the blow of big fuel price rises - a move that might bring the government short-term relief after weeks of protests, analysts said Sunday.
The government moved quickly in making initial payments of around US$30 to tens of thousands of people, hoping to stave off any social unrest triggered by its decision Saturday to raise the prices of a range of fuel products by nearly 30 percent.
The hikes are expected to lead to costlier food, electricity and transportation in the country of 225 million, almost half of whom struggle by on less than a dollar a day.
The government was forced to cut subsidies on fuel to avoid a budget blowout amid the soaring cost of oil on the global market. It had been spending billions of dollars on the subsidies which,
while keeping prices low for the poor, were also enjoyed by the rich.
"Please tell protesters not to be angry," Vice President Jusuf Kalla told people queuing for the handouts on Saturday. "Tell them that money for the poor is more important than cheap fuel for the rich."
Using savings from the subsidy cut, the government plans to give US$10 a month to around 19 million families for the next 1 1/2 years. It is being handed out at post offices around the country.
Arbi Sanit, a political analyst from the University of Indonesia, said the move would help the government's image in the eyes of the poor in the short term, "but it will be temporary because it will not be enough to compensate for the rises."
He said the move was also aimed at blunting criticism from political parties seeking to make gains ahead of next year's parliamentary and presidential elections by painting the government as anti-poor for hiking fuel prices.
Students, Muslim groups and left wing activists have staged daily protests in recent weeks against the rises. Similar demonstrations occurred the last time President Susilo Bambang
Yudhoyono raised fuel prices in 2005, but they petered out once the hikes took effect.
Indonesia is Southeast Asia's largest oil producer and a member of OPEC, but it has to import oil because of decades of declining investment in exploration and extraction.
The 2008 state budget was drafted using an average oil price of US$85 a barrel for the whole year - a figure later revised to US$95. When prices topped the US$100 mark, the cost of protecting consumers threatened to destabilize the already beleaguered economy.
The government is already struggling to pay for health, education and infrastructure development. Some analysts said that although the fuel price increases were a step in the right
direction, they did not go far enough.(**)
