Joko Widodo, who became Indonesia's seventh president on Oct. 20, raised the price of gasoline and diesel by 2,000 rupiah ($0.16) per litre. Gasoline previously cost 6,500 rupiah a litre, and diesel 5,500 rupiah.
Finance Minister Bambang Brodjonegoro added that he expected inflation to rise 2 percent to 7.3 percent this year after the fuel price rise.
Although a highly unpopular step, Widodo has to urgently address Indonesia's biggest fiscal problem - a $23 billion fuel subsidy bill that is the main driver behind the country's twin budget and current account deficits.