W

e should brace ourselves for a new wave of street protests and possibly labor strikes as well as a few weeks of unusually steep rises in the price of basic necessities and services, as a panic reaction to the upcoming 22-44 percent increases in fuel prices.

Though subsidized prices remain 35-60 percent below the economic costs of gasoline and automotive diesel oil, the price increases should still be welcomed as sorely needed reform to prevent macroeconomic instability, because ballooning fuel subsidies have threatened fiscal sustainability and, in turn, political stability.

Moreover, the bulk of the fuel subsidies have always been enjoyed by private car owners who make up the middle ' and top-income groups, thereby widening income inequality. Selling fuel below its economic cost also discourages investment in renewable energy, hinders energy conservation and efficiency and heightens the economy's addiction to fossil fuels at the expense of the environment.

However, all these moral and economic arguments seem irrelevant and meaningless amid the pervasive corruption within the government.

The people seem to be fed up with what they see as bad governance, gross inefficiency and flagrant corruption among senior politicians.

The street demonstrators want to assert that the government has neither the legitimate right nor the moral integrity to ask for sacrifices on the part of the people, who have already suffered a great deal.

As the government is perceived as being utterly corrupt, the people are cynical and even opposed to whatever the government proposes in the way of sharing economic hardship, which is sometimes needed for the long-term good of the economy.

Trust has to be earned and nurtured based on integrity, dedication, fairness and the ability to deliver on promises.

As long as negative perceptions linger ' meaning the government suffers a big trust deficit ' the government will not be able to implement effective fuel reform to gradually remove the wasteful fuel subsidies.

The dilemma, however, is that as a net oil importer that depends on the international market for 60 percent of its fuel needs, Indonesia should use international prices as a reference for its domestic fuel prices. Allowing fuel subsidies to increase uncontrollably amounts to letting the fiscal time bomb tick faster, and so threaten macroeconomic and political stability.

It is, therefore, an uphill challenge for the government to safeguard the implementation of the fuel reform measures. The manner in which the government manages to prevent the wave of street demonstrations over the next few days from disrupting economic activities, and maintain the smooth distribution of basic necessities, will be crucial to minimize the impact of the fuel-price increase on inflation.

Managing inflationary pressures in the next few weeks will be even more challenging in view of the upcoming Islamic fasting month, which begins early next month, and the Idul Fitri celebration in early August; a period that usually sees the highest monthly household spending of the year.