The fuel price hike is expected to contribute 2 percent to the inflation rate. If the year-end inflation rate target is set at 5.3 percent, the full-year inflation will increase to 7.3 percent.Jakarta (ANTARA News) - The government is set to save around Rp100 trillion in funds from the Rp2,000 rise in the price of every liter of subsidized fuel, Finance Minister Bambang PS Brodjonegoro said.
The fuel price hike is expected to contribute 2 percent to the inflation rate, he said following the government announcement of fuel price hike here on Monday night.
"If the year-end inflation rate target is set at 5.3 percent, the full-year inflation will increase to 7.3 percent," he said.
The impact of fuel price hike on the inflation rate will be felt very much in November and December 2014. However, it will ease in January and February 2015, he said.
"The impact will not be as great as in the first two months," he said.
He expressed hope that the 2015 budget deficit target which is set at 2.2 percent of the gross domestic product can be lowered following the fuel price hike.
Minister of National Development Planning/Head of the National Development Planning Agency Andrinof Chaniago meanwhile said the fuel subsidy would be diverted to productive sectors, including increasing food production, expediting the construction of power plants, and financing the construction and repair of roads.
On Monday night, President Joko "Jokowi" Widodo announced a Rp2,000 rise in the price of every liter of subsidized fuel effective early Tuesday.
With the rise, the price of premium-grade gasoline increases to Rp8,500 from Rp6,500 a liter and the price of diesel oil goes up to Rp7,500 from Rp5,500 a liter.
Jokowi said the fuel price hike is the option the government has to take to divert fuel subsidy from consumptive sectors to productive sectors.(*)
Editor: Heru Purwanto
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