Mathew Moore, Jakarta – Despite certain criticism from its international financial backers, Indonesia's Government is set to abandon a series of fuel price rises introduced on January 1 as small but persistent protests around the country enter their third week.

Indonesia's cabinet was meeting late yesterday to decide how to undo its decision to eliminate subsidies which led to price increases of between 2 and 22 per cent at the start of the year.

The move to restore fuel subsidies comes just days after the Government scrapped 15 per cent rises in telephone charges, which were intended to help finance an expansion of the phone system, which reaches only 3 per cent of households.

Electricity price rises of 6 per cent a quarter remain in place for now, although they also look vulnerable as demonstrators are demanding they be scrapped.

The backdowns have alarmed Western diplomats and are certain to be discussed at a meeting today in Bali in which donor countries and the International Monetary Fund are scheduled to decide how much money they will lend Indonesia over the next year to help meet its budget deficit.

The meeting, chaired by the World Bank, will be concerned that scrapping the price rises will undermine the integrity of the Indonesian budget, which is based on revenue the price increases were supposed to raise. The IMF has been pressuring the Indonesian Government to scrap the subsidies to help balance its budget.

When Indonesia's parliament approved the decision to wind back subsidies last year, it ensured subsidies were retained for kerosene, used by most Indonesians for cooking, as well as electricity for households that only use only tiny amounts of power.

Despite these attempts to target the price rises at the country's wealthy, demonstrators have included farmers, workers and other poorer Indonesians who should not be hurt by the increases.

But many poorer Indonesians say they, too, have been affected by the rises because there is no ready access to subsidised kerosene. The only kerosene they can get now costs up to 50 per cent more than it did three weeks ago.

The protesters have vowed to keep rallying until the Government agrees to scrap the rises.