REPUBLIKA.CO.ID, JAKARTA \u2014 The surge in global oil prices due to\ninternational geopolitical tensions is beginning to strain Indonesia\u2019s\nfiscal room. In certain scenarios, the burden of energy subsidies is\nestimated to swell far beyond the 2026 state budget assumptions.<\/p>\n
Executive Director of CORE Indonesia, Muhammad Faisal, stated that\nthe rise in oil prices is a crucial factor that could drive a\nsignificant increase in subsidies.<\/p>\n
\u201cIf the average global oil price exceeds $80 per barrel, with an\nexchange rate of around Rp17,000 per US dollar, the additional energy\nsubsidies could surpass Rp100 trillion,\u201d Faisal said when contacted by\nRepublika on Friday (27\/3\/2026).<\/p>\n
According to Faisal, this calculation uses the annual average price,\nnot short-term fluctuations. This means that even if prices temporarily\nbreach $100 per barrel due to geopolitical escalation, the pressure on\nsubsidies is still calculated based on the yearly average.<\/p>\n
He warned that at that level alone, the 2026 state budget deficit\ncould potentially exceed 3 per cent of Gross Domestic Product (GDP).<\/p>\n
Based on assumptions of Brent oil prices around $110 per barrel, an\nexchange rate of Rp16,976 per US dollar, and a Pertalite quota of 29.7\nmillion kilolitres (KL) in the 2026 state budget, the economic price of\nfuel is estimated at around Rp16,300 per litre.<\/p>\n
With the set selling price for Pertalite at Rp10,000 per litre, the\nsubsidy per litre reaches about Rp6,300. Multiplied by the total volume\nof 29.7 billion litres, the total energy subsidy needs could reach\naround Rp187 trillion.<\/p>\n
This figure far exceeds the state budget subsidy assumption of Rp120\ntrillion, resulting in an overrun of about Rp67 trillion. In percentage\nterms, the subsidy burden swells by around 56 per cent from the initial\nallocation.<\/p>\n
This pressure could intensify if oil prices continue to rise. In a\nmoderate scenario, with oil prices rising about 20 per cent, total\nsubsidies could reach Rp282 trillion.<\/p>\n
Meanwhile, in a high-increase scenario, subsidies could surge to\naround Rp425 trillion. Even in extreme conditions, the subsidy burden\ncould breach Rp500 trillion, which is deemed unsustainable for the\nstate\u2019s finances.<\/p>\n
Faisal assessed that the government cannot rely solely on budget\nefficiency to mitigate this pressure. Overly deep efficiency measures\nrisk stifling economic growth, including household consumption and\nbusiness activities.<\/p>\n
As an alternative, he advocated refocusing and re-evaluating the\nbudget, by redirecting spending from less priority areas to more urgent\nsectors.<\/p>\n
\u201cWith such steps, the budget deficit can be kept below 3 per cent,\nand subsidised fuel prices do not need to be raised,\u201d he explained.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/energy-subsidies-could-exceed-rp-100-trillion-1774612283", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }