Indonesia Enacts a Controversial Fuel Subsidy Cut

Indonesian President Susilo Bambang Yudhoyono's enactment of a controversial fuel subsidy cut will improve Indonesia's short-term fiscal condition, but additional measures will be needed to shift the country's budget away from wasteful subsidies and toward investment and improving Indonesia's infrastructure and economic efficiency. The cut, approved by the country's parliament on June 17, aims to raise end-user gasoline prices by 44 percent and diesel prices by 22 percent per liter. For Yudhoyono, whose ability to manage complex factional infighting among Indonesia's many political parties has waned in line with the approaching end of his second term, the parliamentary vote is only the first step in a longer struggle. Now he must implement the cut in the face of public opposition, or risk further destabilization of the government's budget and the Indonesian currency.