The policy would limit a fiscal impact due to spiraling global crude prices, Fitch said.Jakarta (ANTARA News) - International credit rating agency Fitch Ratings said the Indonesian government`s plan to increase fuel prices, if realized, will have a positive impact on the country`s sovereign debt rating.
The policy would limit a fiscal impact due to spiraling global crude prices, Fitch said in a press statement issued on Monday.
According to Fitch, the policy would increase fiscal flexibility and inflation rate in 2012.
But the rising inflation rate induced by fuel oil price hike expected to take effect on April 1, 2012 would be temporary in nature, it said.
"The inflation hike will be the worst possibility in the short run due to the increase in fuel prices," he said.
The government is seeking to raise the price of subsidized fuel oils by Rp1,500 to Rp6,000 a liter by submitting a draft revision of the 2012 state budget earlier than scheduled.
The government is also planning to increase a deficit of the 2012 state budget to 2.2 percent due to an increase in state spending on energy subsidy.
Fitch also reminded Indonesia of the need to increase its foreign exchange reserves as part of efforts to overcome a sudden reversal of hot money that might weaken the capital market.
Indonesia`s foreign exchange reserves fell by US$0.9 billion in January 2012. Fitch said the needs for foreign exchange reserves were one of the crucial factors in rating state bonds.(*)
Editor: Heru Purwanto
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