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Indonesia's Widodo backtracks on fuel aid as elections near

President looks to raise subsidies he had cut to fund infrastructure building

Indonesia has not raised retail prices for fuel despite rising costs, hurting state-owned oil company Pertamina.

JAKARTA/SINGAPORE -- Indonesian President Joko Widodo plans to raise diesel subsidies amid worries that higher fuel costs threaten his bid for re-election next year, backtracking on a policy to cut aid and allocate funds to more productive projects.

Diesel fuel subsidies will be restored to as high as 1,000 rupiah (7 cents) per liter after the government cut them to 500 rupiah in 2016. The higher subsidy will add roughly 8 trillion rupiah, or 0.4%, to the national budget based on current spending levels. Subsidies also may be revived for regular gasoline, which would result in an even bigger increase in government expenditures.

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