Indonesia Energy Subsidy May Hit $32.6 Billion in 2012

(WSJ) Higher crude prices and a weaker currency on one hand and robust domestic demand on the other may push Indonesia’s energy subsidy to 306 trillion rupiah ($32.6 billion) this year, equal to 23% of the country’s revenue, a Finance Ministry document showed Thursday.

The fourth most populous country in the world heavily subsidizes gasoline, diesel fuel, and electricity to shield millions of its poor. The World Bank estimates that about half of Indonesia’s 240 million population lives under $2 a day.

Fuel and energy subsidies are weighing heavy on the governement budget; infrastructure projects lack funding. (picture credit Serenity)

Despite already turned into a net oil importer, the Southeast Asian nation pegs the price of the widely used RON88 gasoline at IDR4,500 (less than $0.5) a liter, the cheapest in the region, and nearly half the price of the non-subsidized ones.

Read full article by Farida Husna and Andreas Ismar in the WALL STREET JOURNAL