Finance Minister Assures Budget Remains Strong Enough to Absorb Global Oil Price Increases
Jakarta (ANTARA) - Finance Minister Purbaya Yudhi Sadewa has assured that Indonesia’s state budget remains sufficiently robust to absorb increases in global oil prices by bearing the rising energy costs, ensuring the impact is not directly felt by the public through fuel price hikes.
“There are no significant disturbances externally at present, are there? Because the government is absorbing the cost increases,” Purbaya stated during a doorstop interview at the Coordinating Ministry for Economic Affairs office in Jakarta on Monday.
He stated that the government has no intention of raising subsidised fuel prices. He explained that fiscal policy functions as a shock absorber against global volatility, including when global oil prices rise.
If such increases were directly passed on to fuel prices, the situation could potentially slow economic growth and suppress consumer purchasing power.
Purbaya assessed that the state budget’s capacity to absorb oil price increases remains adequate under current conditions. However, the government remains cautious regarding the possibility of higher price increases given the volatile nature of global oil prices.
When asked about the possibility of global oil prices reaching 150 US dollars per barrel, Purbaya believed that if such conditions occur, the surge would not last long as it could trigger a global recession.
“It is fine if oil prices reach 150 US dollars per barrel; we will definitely survive. We will not be destroyed. Why? It will not stay at 150 dollars long. Because everything will be in recession. After that, it will crash all at once,” he said.
He cited past oil price surges that reached approximately 150 US dollars per barrel before subsequently dropping drastically to much lower levels.
According to him, this demonstrates that the global economy cannot sustain such high oil prices for extended periods.
Purbaya also assessed that oil producers ultimately would not allow prices to remain excessively high for long periods as such conditions could harm them when energy demand falls due to global economic slowdown.
On the other hand, the government is preparing contingency measures should oil prices continue to rise over the long term. Under certain conditions, the government will adjust budget policies to minimise impact on the domestic economy.
When asked about plans to issue a Government Regulation in Lieu of Law (Perppu) to widen the budget deficit, Purbaya stated that current budget conditions are still considered safe, so such measures are not yet under discussion.
According to him, fiscal conditions will be evaluated if elevated oil prices persist over an extended period. However, to date, Purbaya believes such conditions have not yet materialised.
“That has not materialised so far, because the budget remains safe. If oil prices remain high and persist for a long time, only then will we recalculate what the budget conditions look like. But not immediately a Perppu,” Purbaya said.