Jokowi will be inaugurated as the new President of Indonesia next month, with investors hoping he will embrace a reformist mandate. Late last week, there were reports that the new administration is considering a fuel price hike as large as Rp. 3000/litre by November. There are certainly reasons to be skeptical, as the tough political calculus of cutting subsidies could see Jokowi under deliver. But, if Indonesia bites the subsidy bullet hard, with a Rp. 3000 hike, we would take this seriously. Such a move could be as significant in turning around the trade deficit, as India’s gold import restrictions were last year.
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