Explainer: Indonesia bites the bullet on fuel prices as subsidies soar

to contain ballooning spending on energy subsidies in Southeast Asia's biggest economy.

Jokowi, as the president is popularly known, also hiked the price of 92-octane gasoline, known as Pertamax, to 14,500 rupiah per litre, from 12,500 rupiah. Pertamina does not receive compensation for losses in Pertamax sales.The government has already tripled its energy subsidy spending this year from the original budget to 502.4 trillion rupiah to keep subsidised fuel prices and some power tariffs unchanged amid high global energy prices.

The current price hike comes at a time when food prices are already trending up. August inflation was 4.69 per cent, above the central bank's target range for three months in a row. Bank Indonesia raised interest rates on Aug 23 for the first time since 2018 in a move analysts said was to pave the way for the fuel price hike announcement. BI is still well behind most peers in its roll back of pandemic-era stimulus and economists expect more hikes.

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