Govt seeks extra Rp 2t in budget cushion amid high oil prices

Aditya Suharmoko ,  The Jakarta Post ,  Jakarta   |  Thu, 07/17/2008 10:10 AM  |  Business

The government and lawmakers are working on accumulating an extra Rp 2 trillion (US$218.98 million) in a budget cushion to anticipate high crude oil prices.

In a meeting with the House's budget committee Tuesday evening, Finance Minister Sri Mulyani Indrawati said the government would use the cushion if the Indonesian Crude Price (ICP) -- the country's benchmark oil price -- averaged $150 per barrel over the rest of 2008.

The figure would be on top of the Rp 8.25 trillion already provided for a similar purpose -- with the government having spent it all in the first semester.

The Finance Ministry predicts the ICP to be at $145 per barrel on average between July and December, reaching a full-year price of $127.2 per barrel.

Light sweet crude in New York was traded at $138.74 per barrel Wednesday, after reaching an all-time high of $147.27 on Friday, AP reported.

The extra cushion is designed to accommodate the government's pledge to not raise domestic fuel prices again, having done so in May, in what critics say is a populist way to lure public support ahead of next year's general elections.

The government estimates subsidies to reach Rp 236.1 trillion in the second half of this year, more than double the Rp 91.7 trillion spent on subsidies in the first semester.

The fuel subsidy is estimated at Rp 119.8 trillion, up from Rp 60.5 trillion; electricity subsidy Rp 62.1 trillion, up from Rp 26.4 trillion; and non-energy subsidies Rp 54.2 trillion, up from Rp 4.8 trillion.

"The composition of the state budget for subsidies is higher than for government offices, including salary payments (to civil servants)," Sri Mulyani said.

At the meeting, the government also asked for the House's approval to allocate Rp 1.2 trillion for other crucial needs, and Rp 900 billion for election supervisory body, Bawaslu.

Indonesia will hold its third democratic elections next year. The campaign started early this month.

"Other crucial needs include, for example, support for natural disasters," the ministry's head of fiscal policy Anggito Abimanyu said after the meeting.

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