Purbaya to Add Rp100 Trillion to Indonesia's Energy Subsidies

TEMPO.CO, Jakarta - Indonesia may add Rp90 trillion to Rp100 trillion (US$5.3 billion–US$5.9 billion) in energy subsidies this year as the war involving the United States, Israel, and Iran fuels a global energy crisis, Finance Minister Purbaya Yudhi Sadewa said on Wednesday, April 1.

“Rp90 trillion to Rp100 trillion,” Purbaya said when asked about the possible increase after a meeting at Wisma Danantara Indonesia in Jakarta.

Purbaya said the additional allocation would be used for energy subsidies, not compensation payments. The subsidies cover commodities such as 3-kilogram LPG cylinders and diesel fuel.

In Indonesia, compensation refers to government payments to state-owned companies such as Pertamina to cover the gap between government-set retail fuel prices and market-based prices.

Under the compensation scheme, the government covers the price gap for Pertalite, a special-assignment fuel product widely used by motorists.

“That Rp90 trillion to Rp100 trillion is for subsidies. Compensation is separate. I forgot the compensation figure,” Purbaya said.

The planned increase would come on top of the government’s previously allocated Rp210.1 trillion in energy subsidies, equivalent to about 65.9 percent of the Rp318.9 trillion total subsidy budget in the 2026 state budget.

When combined with compensation payments, the government’s total spending on energy resilience has been budgeted at Rp381.3 trillion.

Purbaya said the government had already calculated the fiscal impact and insisted the state budget deficit would remain under control through the end of the year.

“We have calculated everything. Even if average global oil prices reach US$100 per barrel, we have locked the deficit below 3 percent, at around 2.9 percent. So there is no problem,” he said.

Speaking at a virtual press conference in Jakarta on Tuesday, March 31, Purbaya said fiscal management was being maintained prudently so the state budget would still have room to cushion global economic shocks.

He urged the public not to worry about the risk of a widening budget deficit.

The government has outlined several scenarios for how rising oil prices could affect the 2026 state budget.

In the first scenario, Indonesian Crude Price (ICP) is projected at around US$86 per barrel, with the rupiah weakening to about Rp17,000 per US dollar, compared with the budget assumption of Rp16,500 per dollar. With economic growth at 5.3 percent and government bond yields at around 6.8 percent, the budget deficit is estimated at 3.18 percent of GDP.

Under a moderate scenario, oil prices are projected at US$97 per barrel and the rupiah at Rp17,300 per dollar. Economic growth is expected at 5.2 percent, with government bond yields at 7.2 percent, potentially pushing the deficit to 3.53 percent.

In the pessimistic scenario, oil prices could rise to US$115 per barrel, while the rupiah weakens to Rp17,500 per dollar. With economic growth still around 5.2 percent and bond yields at 7.2 percent, the budget deficit could widen to 4.06 percent.

Read: Indonesia Keeps Fuel Prices Steady as Pertamina Absorbs Cost of Oil Surge

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