Government Holds Back Fuel Price Hike, Here is Its Impact on the State Budget
Energy economist from Gadjah Mada University (UGM) Fahmy Radhi views the government’s decision not to raise fuel (BBM) prices as an appropriate step to protect public purchasing power amid current global economic pressures. According to Fahmy, the government is demonstrating caution in policymaking by considering broad impacts. This decision reflects efforts to maintain economic stability while protecting society from inflationary pressures.
“Indeed, the government faces a difficult choice. If not raised, the burden on the APBN is quite heavy, but if raised, it will ignite inflation, reduce public purchasing power, and so on. I think not raising BBM, whether subsidised or non-subsidised, is the right decision and deserves appreciation,” said Fahmy when contacted in Jakarta on Tuesday (31/3/2026).
He stated that this step is appreciated because it can dampen potential inflation increases and maintain household consumption, which is one of the main pillars of national economic growth. Fahmy explained that public purchasing power, especially among the middle class, had already been under pressure beforehand, so this policy helps maintain economic balance and provides room for gradual recovery. The policy is seen as having positive effects by stabilising prices and creating a sense of security for the public in facing the challenging and uncertain dynamics of the global economy.
“Because before this crisis occurred, middle-class purchasing power had been continuously declining. If added to a fuel price increase, both subsidised and non-subsidised, purchasing power would be further eroded, which is quite dangerous for the Indonesian economy,” he said.
Nevertheless, he views this policy as also opening opportunities for the government to strengthen fiscal management to keep it healthy, in line with the increasing budgetary needs to maintain national energy subsidies.
Fahmy sees this situation as a momentum to optimise state revenue and expenditure budget (APBN) management strategies, including adjusting oil price assumptions to be more adaptive to global market developments.
He also emphasised the importance of innovative steps in maintaining fiscal balance, so that the policy of keeping fuel prices aligned with state budget sustainability.
According to him, budget reallocation can be a constructive solution to strengthen energy subsidies while ensuring various priority programmes continue to run effectively and provide broad benefits to society.
“If covering the APBN with debt, it seems very difficult, because debt is already large and there is a law limiting the deficit to no more than 3 percent of GDP,” he said.
“In my view, closing the APBN needs can be done through budget reallocation from other programmes,” added Fahmy.
It is known that the budget deficit limit of three percent of gross domestic product (GDP) has long been one of the main pillars of Indonesia’s fiscal discipline.
This provision is stipulated in Law No. 17 of 2003 on State Finances, which regulates that the APBN deficit must not exceed three percent of GDP, while the government debt ratio is maintained at a maximum of 60 percent of GDP.