Economists Outline Options to Keep Indonesia's Budget Deficit Below 3%

The government is deemed to need to move quickly to anticipate rising oil prices if it does not want the State Budget (APBN) to exceed a 3% deficit.

Myrdal Gunarto, Global Markets Economist at Maybank Indonesia, said that the rapid increase in oil prices over the past 4-5 days serves as a warning to the government to implement fiscal strategies.

“They must secure the deficit target below 3%,” Myrdal told CNBC Indonesia on Monday (9 March 2026).

To achieve this, the government must implement priority budget policies. Budget spending must adjust to current state revenue conditions, Myrdal said. He also believes the government could carry out budget rationalisation, particularly rationalisation of energy subsidy spending.

“So if the oil price rises, energy subsidies will inevitably have to be evaluated again. Whether they will make additional allocations, especially additional energy subsidy allocations at the expense of spending on other budget items, or whether they will continue to increase energy subsidies as long as state revenue also increases,” Myrdal explained.

This will be a difficult choice amid current conditions. However, rationalisation policies must inevitably be adopted by the government. He believes the government could take an alternative approach by tightening energy subsidies only for the appropriate beneficiaries.

However, this policy must still be accompanied by fuel price increases if the rise occurs consistently over the past month.

“So there is a possibility the alternative is that energy subsidies are given only to those who truly deserve them. So ultimately there is a possibility of tariff increases for both Pertalite and diesel. But that is done if the oil price is consistent for 1 month, at least 1 month,” Myrdal said.

“At least 1 month that already exceeds the APBN target at the US$70 per barrel level,” he continued.

If the average oil price in the past month is at the level of US$110 per barrel and combined with the average of the first three months at US$65 per barrel, then the oil price has already exceeded the APBN limit.

“Looking at what the gap is? If the gap is, for example, US$7 per barrel, so if the average oil price is US$77 per barrel, yes the government has the potential to increase fuel prices by 10%, both Pertalite and diesel,” he said.

Then, if the oil price rises another 10% to US$84 per barrel, Myrdal calculated there is a possibility of raising the price of diesel and Pertalite by 20% from the current fuel prices.

“If the average rises to US$91 per barrel because of another increase, then there is a gap of 30% from the current level for fuel at US$70 per barrel,” he explained.

If the oil price rises again to an average of US$115 per barrel, the price increase for Pertalite and diesel could be 60%. However, Myrdal said this increase cannot be avoided.