"If there is no fuel price hike, it will have a bad impact because the public has calculated the impacts of the fuel price rise in 2014," BI Governor Agus Martowardojo said.Jakarta (ANTARA News) - Bank Indonesia (BI) supports the plan of Joko "Jokowi" Widodos administration to increase subsidized fuel prices that have, so far, burdened the State Budget (APBN).
The fuel price hike will reduce pressure on the APBN and offer more space for a bigger fiscal, BI Governor Agus Martowardojo stated here on Friday.
"If there is no fuel price hike, it will have a bad impact because the public has calculated the impacts of the fuel price rise in 2014," he pointed out.
The central bank has closely followed the developments related to the discourse on fuel price hike. BI has also calculated and forecast the impacts of the fuel price hike on the inflation rate.
Earlier, Deputy Governor of BI Perry Warjiyo remarked that if the fuel price was increased by Rp3 thousand per liter, it will contribute around 3 to 3.5 percent to the inflation. However, it will depend on the second and third round effects.
The first round effect will contribute 1.5 percent to the inflation, while the second round effect will depend on the cost of city transportation services and other factors.
He estimated that the second and third round effects would be around 3 to 3.5 percent. The impacts of the fuel price hike will be felt during the initial three months, and it will normalize in the fourth month, he added.(*)
Editor: Heru Purwanto
Copyright © ANTARA 2014
