Indonesia busts US$20 bln on fuel subsidies as inflation picks up

JAKARTA, March 30, 2008 (AFP) – With prices for key commodities at record highs, Indonesia — Southeast Asia’s biggest economy and a key exporter — should, at first glance, be enjoying good times.

But with high oil prices leading to a government fuel subsidy blowout and rising food prices hitting the poor, analysts say most Indonesians are being squeezed.

Indonesia is the world’s largest exporter of palm oil and a major exporter of coal and gas.

It exported 4.9 billion dollars’ worth of coal and 4.5 billion dollars’ worth of crude palm oil between January and September last year, according to the trade ministry.

This has helped Indonesia achieve the strongest growth and stability it has seen since the 1997 Asian economic crisis, with the central bank forecasting first-quarter GDP growth of 6.2 percent.

But the commodity boom has meant little gain for most people here, said Fauzi Ichsan, an economist with Standard Chartered bank.

“Indonesia should benefit from the higher commodity prices because yes, Indonesia is a net importer of oil. But Indonesia is a net exporter of energy and commodities,” he said.

The problem, according to Ichsan, is that the benefit is mos