The surge in global oil prices is causing concerns about domestic\nfiscal pressures. The room to maintain the state budget deficit below\nthe 3% threshold is becoming increasingly challenging. For context,\nglobal oil prices have reached around US$140 per barrel.<\/p>\n
Economist from the Center of Reform on Economics (CORE), Yusuf Rendy\nManilet, outlined several scenarios for global oil price movements and\ntheir impacts on Indonesia\u2019s state budget deficit. The first scenario is\na rapid de-escalation, meaning that after touching US$140, prices\nquickly drop to US$80\u201385 in the near term. In this case, the annual\naverage could still be maintained around US$85.<\/p>\n
Under these conditions, the additional subsidy burden would be\nrelatively limited, and the deficit could still be kept below 3% of GDP,\nat around 2.6%\u20132.7%. \u201cBut to be honest, the probability of this scenario\nis low because there are no strong signals of reduced global tensions,\u201d\nYusuf told Media Indonesia on Sunday (5\/4).<\/p>\n
The second scenario is a gradual correction. In this case, global oil\nprices remain high in the near term, then drop to around US$100 in\nmid-year and approach US$90 by year-end.<\/p>\n
In this scenario, Yusuf said, the annual average price would rise to\naround US$95\u2013100. The additional subsidy burden could be in the range of\nRp150\u2013160 trillion. \u201cThe deficit would move very close to 3%, around\n2.9%. This is a very fragile position with almost no buffer room,\u201d he\nstated.<\/p>\n
The third scenario, according to Yusuf, is the most realistic at\npresent, namely prolonged high prices. In this case, oil stays at\nUS$130\u2013140 until mid-year, then drops to around US$100. Under these\nconditions, the annual average could exceed US$105.<\/p>\n
In such a situation, the additional subsidy burden would approach\nRp200\u2013230 trillion, and the deficit could breach 3%, potentially\nreaching 3.1%\u20133.2%. This means the fiscal limit could be violated in the\nrelatively near term.<\/p>\n
The fourth scenario is extreme escalation, where prices remain above\nUS$140 for longer. In this case, Yusuf said, the annual average could\nexceed US$110, the subsidy burden would surge by more than Rp250\ntrillion, and the deficit could reach 3.3% or more.<\/p>\n
\u201cEspecially if the exchange rate weakens as well. This is already\nentering a zone of serious pressure on fiscal credibility,\u201d he\nadded.<\/p>\n
\u201cFrom all these scenarios, the main conclusion is quite clear.\nWithout policy adjustments, particularly on the energy side, keeping the\ndeficit below 3% will be very difficult, unless we are in the optimistic\nscenario which has low probability,\u201d he concluded.<\/p>\n
The Indonesian House of Representatives (DPR RI) assesses that the\ngovernment needs to consider adjusting fuel prices (BBM) to reduce the\ncurrent fiscal burden, which is already under severe pressure.<\/p>\n
Adjustments cannot be made drastically. With oil prices at US$140 and\nan exchange rate around Rp17,000, the economic price of BBM could be far\nabove current levels.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/global-oil-prices-surge-potential-impacts-on-the-state-budget-1775645598", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }