Joko Widodo hasn’t even started his first term as president of Indonesia, yet he’s already hit a snag. The future leader asked the current president Susilo Bambang Yudhoyono, to begin eliminating the fuel subsidies that take up about one-fifth of Indonesia’s budget. President Yudhoyono refused.
Joko Widodo (commonly called Jokowi) will become the second directly elected president of Indonesia. His predecessor Yudhoyono is leaving a democratic, decentralized government as a lasting legacy, but he is also leaving an Indonesia addicted to cheap resources.
Indonesia is home to the cheapest gas in Southeast Asia thanks to a massive government subsidy program. That expenditure is a big problem for Widodo, who is facing a budget deficit approaching the government’s sustainable limit of 3 percent.
But President-elect Widodo will have to wait until he takes office October 20 to do anything about it.
Joko Widodo and Yudhoyono held a two-hour closed-door meeting to coordinate the transition between presidents. At the meeting, Widodo made the request that the current administration raise the fuel price, but Yudhoyono did not feel the time was right.
The Indonesian Democratic Party of Struggle (Joko Widodo’s political party) has said that the subsidy needs to be reduced, or Indonesia will succumb to a financial crisis. Typically the government spends about $20 billion on fuel subsidies, about 20 percent of the national budget. However, the most recent estimate puts the subsidy as costing about $31 billion. Combined with the money slated to pay off foreign debts and Joko might quickly be facing a budget crisis in his first 100 days.
Yudhoyono says that the Indonesian people can’t handle a major price increase right now.
Nearly half of the population still lives on less than $2 a day, and economic growth has slowed down over recent years. Economic Minister Chairul Tanjung explained the president’s position, “The Yudhoyono administration feels that the public has struggled enough. Therefore we do not want to place a heavier burden on them.”
It is true that the administration has already raised fuel prices twice in the past, once by 140 percent.
It’s clear that Widodo will have to do his own dirty work.
Raising the subsidy will no doubt be an unpopular move, but it’s one that will be necessary if Joko Widodo wants to fulfill his campaign promises. The future president would rather spend the government’s money guaranteeing his people a 12-year public education system and universal health care.
Joko Widodo’s resolve will be tested quickly in his presidency, and he’ll be facing the political consequences by himself.
[Image Credit: NHD-INFO/Wikimedia Commons]