Jakarta (IIndonesia plans to limit the use of subsidized fuel in a decree to be announced on Friday, the country’s energy minister said on Tuesday, in a move likely to add to inflation and dampen demand for imported motor fuel.

Jero Wacik, the energy minister, said he had already approved a draft that would be sent to the president for signing this week, though declined to give details on how or when the subsidy curbs will be implemented.

Subsidy curbs of some kind have been expected from April this year and are seen by analysts as long overdue, after the government delayed a move last April to ban private cars’ access to subsidized fuel, priced at half the market rate and the cheapest in the region.

Economists say a move to limit subsidies could add to inflationary pressures in coming months, a worry that may have kept the central bank from further cutting its benchmark overnight policy rate from a record low 6 percent this month.

After holding its rate, Indonesia’s central bank said it saw government limits on fuel subsidies adding 0.72 to 0.94 percentage points to inflation this year.

With annual inflation having eased to a 21-month low in December of 3.79 percent and a global economic slowdown likely to keep a lid on world commodity price gains, policymakers may now have the room to implement a subsidy cut.

And in the longer term, economists and rating agencies say Indonesia needs to reduce its use of costly fuel subsidies that benefit relatively well off motorists, to ease the pressure on state finances should regional fuel prices GL92-SIN spike.

“Not addressing escalating fuel subsidies risks widening the oil-related trade deficit and tipping the current account into deficit in 2012. This could put pressure on foreign exchange reserves,” said Hak Bin Chua, economist at Bank of America Merrill Lynch.

A rally in oil prices could also put pressure on the government to lift the state-controlled fuel prices, a move policymakers are keen to avoid since sudden fuel price hikes helped end the reign of autocratic leader Suharto in 1998 and could lead to social unrest across the sprawling archipelago.

The former OPEC member is Asia’s largest gasoline importer because its dilapidated refineries do not produce enough fuel to meet rising demand.

Vehicle sales hit a record last year as an emerging middle class snapped up Toyota cars. The government is also keen to convert vehicles to use natural gas to reduce spending on fuel imports.

Indonesia has huge domestic gas reserves and is the world’s third largest liquefied natural gas exporter.

Finance Minister Agus Martowardojo told reporters the government aims to accelerate the conversion of cars to use gas from this month. “We have funds for the conversion,” Martowardojo said, without giving details.