President-elect Joko ‘Jokowi’ Widodo is bracing himself to face policy challenges left behind by his predecessor, chief of which is the fuel subsidy issue. What impedes the reallocation of fuel subsidy funds and what are the possible solutions?

Despite having won the President and Vice-President posts respectively, Joko Widodo and Jusuf Kalla will possess little control, if at all, on the formulation of the next state budget for fiscal year 2015/2016. One particular issue that concerns the new administration is the large portion of funds for energy subsidies, particularly fuel subsidies.

To ensure his administration would have more fiscal space to fund new government projects and minimise the budget deficit, President-elect Jokowi, as he is usually called, has proposed to outgoing President Yudhoyono to increase the price of subsidised fuel as his final policy gesture before stepping down. President Yudhoyono turned down the request on the ground that increasing the price of subsidised fuel would aggravate the economic burden of the people.

…Keoni Indrabayu Marzuki is a research associate of the Indonesia Programme at the S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University.