|
Hanoi: Asian governments are split on ways to cope with record oil prices, with some subsidising costs for consumers to contain inflation and others raising energy prices to lower the effect on their budgets.
Indonesia and Taiwan both pledged payments to low income families to help them cope with planned fuel-price increases and New Zealand's fin-ance minister Michael Cullen yesterday announced tax cuts designed to help workers struggling with living costs. China, suffering the deadliest earthquake in 32 years, said this week it has no plans to lift fuel-price caps.
"We see fiscal positions deteriorating in countries that subsidise the local cost of oil," said Robert Subbaraman, chief economist at Lehman Brothers Asia Ltd. in Hong Kong. "If oil prices stay persistently high at these levels, these kinds of measures can do more damage than good."
Indonesia's President Susilo Bambang Yudhoyono, facing elections in 2009, is raising fuel prices for the first time in almost three years to reduce subsidies. The government would have to spend 190 trillion rupiah ($20 billion, Dh7.34 million) on subsidies if fuel prices were not increased, finance minister Sri Mulyani Indrawati said yesterday.
Social unrest
The government expects to save 34.5 trillion rupiah by raising fuel prices, she said. About 14 trillion rupiah will be used to compensate the poor for the increase in energy costs and to thwart social unrest. About 12.2 trillion rupiah will help narrow the government's budget deficit.
Taiwan, which plans to increase fuel prices on June 2, will distribute NT$20 billion ($659 million) in subsidies to middle and low-income families to offset higher energy costs, Premier Liu Chao-shiuan said yesterday, two days after being sworn in.
New Zealand's government handed the nation's 2.2 million workers income-tax cuts worth NZ$10.6 billion ($8.2 billion) over the next four years. "Food and oil prices have soared far higher and faster than we've seen for a long period," Cullen said. "Our budget delivers tax relief for workers who are struggling with rising cost of living."
Inflation
Most Asian policymakers are holding off rate cuts needed to boost growth as inflation accelerates across the region.
China's consumer prices rose 8.5 per cent last month, close to the fastest pace since 1996. Inflation rates in Sri Lanka and Vietnam have exceeded 20 per cent, while Singapore's consumer price gains have reached levels not seen since 1982.
The Bank of Thailand yesterday joined other regional central banks including South Korea and the Philippines in keeping borrowing costs unchanged. Bank Negara Malaysia policy makers are expected to keep the key rate unchanged.
|
