Facing Oil Price Hikes, Purbaya Relies on Taxes and Domestic Demand

JAKARTA — Amid rising geopolitical tensions surrounding Iran that could push global oil prices higher, Finance Minister Purbaya Yudhi Sadewa said the government’s main strategy is not merely to contain the deficit, but to strengthen the fiscal foundation from within the country.

According to Purbaya, the channels through which the Middle East conflict affects Indonesia are primarily through oil prices and export trade.

“We will ensure that our tax collection and excise revenue do not leak. So we can reduce pressure on the deficit,” he said at the Presidential Palace complex in Central Jakarta, on Tuesday, 3 March 2026.

He stated that the government has room to make adjustments if pressures rise.

An increase in energy import prices could indeed pressurise the deficit, but anticipatory measures have been prepared.

The government’s main focus, he said, is to ensure state revenue, particularly from taxes and excise, remains optimal and leak-free.

With tax collection maintained, pressure on the deficit can be damped even as global energy prices rise.

Purbaya also emphasised that Indonesia’s economic resilience is not solely dependent on global dynamics. He reminded that around 90 per cent of national economic growth is supported by domestic demand.

As long as purchasing power and domestic activity remain intact, the economy is considered able to withstand external turmoil.

Regarding energy stock issues, he explained that oil purchases are conducted on an annual basis. The 20-day stock reserve often cited is an extreme scenario if supply were to halt entirely.

In practice, the government still secures supply, albeit perhaps at higher prices.

With these assumptions, Purbaya assured that the budget deficit remains within controllable bounds.

The government will continue to monitor global developments and calculate further steps if pressures increase, while preserving fiscal stability and the strength of domestic demand as the main pillar of the national economy.