Govt Fuel Subsidies ‘of Growing Concern’: WB

JAKARTA ~ Indonesia’s ballooning fuel subsidies are putting pressure on government budgets and would be better spent on much-needed infrastructure and social projects, the World Bank said.

The country’s fuel subsidies have become increasingly expensive as the price of oil has soared.

The bank said the government’s budget was of “growing concern,” after revised figures showed the projected cost of the subsidy this year has nearly tripled to Rp126.8 trillion (US$13.8 billion).

“Fuel subsidies are crowding out other spending,” William E. Wallace, the bank’s lead economist for Indonesia, told reporters at a briefing on Tuesday.

Wallace said spending on fuel subsidies now swallowed up more of the government budget than capital investment and social spending combined.

“(The money) could go for much-needed infrastructure and social spending,” he added.

The bank estimates that around 45 percent of the subsidies go to Indonesia’s wealthiest households.

President Susilo Bambang Yudhoyono has been under pressure from some economists to end or reduce them, but with an election in the offing next year, he has sworn off any cuts.

The last cuts to the fuel subsidy in 2005 were met with street protests.

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