Saturday, October 01, 2005

Gerin oil in Bali, sobriety in Jakarta

The blast in Bali which has killed at least 12 people will presumably have some people punching the air with joy, although not necessarily with as much ecstasy as Ali Ghuron, better known as Mukhlas, greeted the news that he was to be executed by firing squad for murdering 202 innocent holidaymakers whom he had never met.

But the bigger picture across Indonesia is not necessarily altogether bad. Among the things to watch will be the consequences of SBY's dramatic cuts in fuel subsidies, which will hugely improve the government's fiscal situation but, among other things, triple the price of kerosene, the primary cooking fuel the poor.

If - and it's a big if - the government can spend the substantial savings wisely, and the monthly
Rp100,000 (approx $9.50) payments to 15.6m poor families for the rest of this year actually work and are sufficient, then the reforms could contribute to better allocation of resources. But it's a high stakes game (see also Easing the Chocks, The Economist, 29 Sep).

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