Jakarta – Indonesia could be forced to cut back on a state funded compensation scheme for the poor which was supposed to compensate for a reduction in fuel subsidies planned for October.

National development Minister Sri Mulyani Indrawati said Jakarta had planned to spend 9.3 trillion rupiah (910 million dollars) on cash payments to some 15.5 million poor households under the scheme.

But she said delays in deciding when and how to reduce fuel subsidies – expected to cost Indonesia up to 14 billion dollars this year – meant the government was finding it difficult to raise the funds.

"Our budget will provide us with many, many more constraints," she said in an interview with the Financial Times. "I do believe that we may not have more than six trillion rupiah (588 million dollars)."

A reduction of the politically-sensitive subsidies could trigger further criticism against President Susilo Bambang Yudhoyono who has delayed any increase in fuel prices until October.

Calls for a reduction in costly fuel subsidies have intensified recently as global oil prices struck record highs placing a huge burden on the government's budget and resulting in a sharp fall in the local currency.

A cut in fuel subsidies would raise the cost of living for Indonesia's impoverished millions and the compensation scheme was expected to address the financial imbalance.

Indrawati said the government had brought forward its original plan to roll out the compensation package and the fuel price rises together in January.

But the government, she said, was now working towards making the first round of cash disbursements to the poor by the third week of October, ahead of the Islamic Eid al-Fitr holiday in November.

That schedule was ambitious, Indrawati admitted, but added that Indonesia was "quite confident in terms of our ability to mobilise the system."

She said the specifics were still being discussed although it would come alongside the long-delayed roll-out of education, health, and rural development programs that were announced with a March increase in fuel prices.

The initial target, she said, was to make payments of 600,000 rupiah (58 dollars) – roughly Indonesia's monthly minimum wage to 15.5 million households – or about 62 million people, at a total cost of 9.3 trillion rupiah.

In a related development, the international ratings agency Standard and Poor's on Friday downgraded Indonesia's rating outlook to stable from positive.

The agency said it affirmed its 'B+' long-term foreign and its 'BB' long-term local currency sovereign credit ratings on Indonesia.

It also affirmed its 'B' short-term sovereign credit ratings on Indonesia. The outlook change reflected increasing concern by the agency over the apparent inability and unwillingness of the Indonesian authorities to address the underlying problems behind the rupiahs recent rapid depreciation.

Policy responses to renewed bouts of currency weakness have tended to be slow, reactive, and incremental over the past year," said Standard and Poors credit analyst Agost Benard. "In a rapidly evolving environment such as that which we are facing in the global energy markets, the inability to craft and implement appropriate policy measures leaves fiscal and external balances exposed.

"This could ultimately threaten to undo the macroeconomic stability achieved in recent years," he said.