Anticipating Widening Deficit, Government Finally Evaluates MBG
The Indonesian government is racking its brains in responding to the impact of rising energy prices, stemming from the escalation of war in the Middle East. Among other measures, it is evaluating priority programmes, such as the Free Nutritious Meals (MBG). This includes eliminating MBG provisions on Saturdays and abolishing MBG during school holidays.
Deputy Finance Minister of Indonesia, Juda Agug, acknowledged the potential for the State Revenue and Expenditure Budget (APBN) deficit to widen further due to the increase in global oil prices.
In the macroeconomic assumptions for the 2026 APBN, the government set the oil price assumption at $70 per barrel throughout the year, the price of diesel fuel (BBM) at Rp 6,800 per litre, and Pertalite at Rp 10,800 per litre. With those assumptions, the budget deficit is 2.68%.
Then, in March 2026, conflict erupted in the Middle East region between Iran and the US-Israel. The ICP (Indonesia Crude Price) rose, even reaching around $100 per barrel. According to Juda’s calculations, the average ICP price from January to the end of April 2026 reached around $79.80 per barrel.
“What does that mean? There is an excess or overrun from the $70 per barrel assumption. What is our response? The government’s response is that subsidised fuel prices do not rise. The prices remain the same. Of course, if the prices remain, the economic prices rise, and the subsidies swell. The subsidies swell, so if left alone, the deficit could be above 3%, if left alone. That is the assumption if the ICP average throughout the year is $100 per barrel,” Juda explained at the Kick Off for Accelerating National Intermediation (Pinisi) event at the Bank Indonesia (BI) Complex, Jakarta, on Monday (27/4/2026).
He explained that the government is certainly not standing idly by. In particular, the government ensures it will maintain public purchasing power. One way is by keeping inflation from being pulled too high.
In addition, the government is not closing itself off to taking more strategic steps in facing the potential widening deficit. Namely, by carrying out refocusing.