Indonesia regions told to curb transport costs to contain inflation

Indonesia's President Joko Widodo said on Wednesday he had ordered provincial governments to use their budgets to rein in transportation costs and counter the inflationary impact of last week's fuel price hike on Southeast Asia's biggest economy.

Under pressure to control a swelling energy subsidy budget, Widodo, popularly known as Jokowi, hiked subsidised fuel prices by 30% on Saturday, sparking protests across the nation of 270 million people.

"The calculation by my ministers was (inflation will) rise by 1.8 percentage points. But that's if we do nothing. I don't want to do nothing, we have to intervene," Jokowi said, referring to the knock-on inflationary impact of fuel prices.

"Regional (governments) must take action like during the (pandemic)," he said, adding local leaders had been told to use their budget to cover higher transportation costs, especially for distribution of basic foods like shallots and eggs.

Indonesia's August inflation rate was 4.69%, already near a seven-year high and above the central bank's target for a third straight month due to rising food prices.

Later on Wednesday, the transport ministry announced that minimum fares for app-based motorbike taxi services will be hiked by up to 13.33% per km starting Sept 10 to account for the fuel price hike. 

The ministry would also increase the minimum base fares for the first 4km (2.49 miles) of travel by between 13% to 31%, depending on the area of service.

In Indonesia, motorbike taxis are extensively used for transport as well as to deliver goods, through platforms operated by firms such as GoTo and Grab, with drivers seeking fare adjustment as costs rose.

A transport ministry official said the fare changes only applied to transport services and not deliveries.

Jokowi called on the public to unite to weather the energy and food crises that have been exacerbated by the war in Ukraine, which he said would continue to affect global supplies for a while yet.

The president made no mention of protests that have flared up since his announcement. His ministers have sought to ease tensions by emphasising that money is being pumped into state welfare programmes to soften the blow from rising inflation.

Thousands of people joined protests across Indonesia on Tuesday against the fuel price hike, but analysts say Jokowi is well placed to weather the storm due to strong political backing. 

On Wednesday, a small rally took place outside the Bogor presidential palace, while in Aceh province on Sumatra island, police fired tear gas to disperse protesters, media reported.