High oil prices threaten state budget
Urip Hudiono, The Jakarta Post, Jakarta
Continuing high global oil prices have put Indonesia's fiscal stability teetering on a tightrope as the oil-producing country fails to benefit from the situation. Instead, the country faces swelling oil import costs due to rising domestic fuel consumption.
In its first semester progress report on this year's budget to the House of Representatives, the government reported that revenues from oil exports during the year's first six months only reached Rp 18.5 trillion (US$1.9 billion), or less than a quarter of its Rp 85.6 trillion target.
Similarly, export proceeds from the country's natural gas production have barely reached 29 percent of the expected amount, or only some Rp 8.8 trillion.
On the other hand, fuel subsidy spending stands so far at Rp 40 trillion, or already more than half of the Rp 76.5 trillion allocated for this purpose.
"Fuel subsidy spending has probably increased again by now, reaching some Rp 50 trillion as I'm speaking," Minister of Finance Jusuf Anwar said during the hearing last week, adding that the figure could well reach some Rp 112 trillion by the end of the year.
He explained that the difficult situation was caused by the fact that Indonesia had still not boosted its flagging oil production, while domestic fuel consumption kept rising as a result of higher economic growth, which is expected to reach 6 percent this year.
With Indonesia's existing oil wells experiencing a natural decline of up to 15 percent a year, the country's oil production during the first half of the year only reached 1.090 million barrels per day (mbpd), below the full-year target of 1.125 mbpd.
Domestic fuel consumption, meanwhile, is estimated to have already exceeded the 59.6 million kiloliters quota by some 10 percent, Jusuf said, further confirming Indonesia's status as a net oil importer.
With the government seemingly determined to keep subsidizing domestic fuel through the state budget, and global oil prices hitting $62 a barrel last week, the cost of subsidy spending could well jeopardize the budget's deficit financing.
"The source of all our fiscal troubles is this factor of soaring oil prices," Jusuf said.
Consequently, the government will continue its efforts to increase the country's oil production by replenishing old wells and encouraging the exploration of marginal oil fields.
On the demand side, the government will continue its energy conservation campaign, and review its fuel subsidy policy.
The report, however, stresses that the fiscal imbalance could drag on until for the rest of the year as the government estimates that the country's oil production will only reach 1.075 mbpd by then, still below the 1.125 mbpd target.
As a result, state non-tax revenues -- which include oil and gas exports -- will only reach Rp 120 trillion, or only 76.5 percent of the target, bringing the budget's total revenue to Rp 516 trillion.
State expenditures, meanwhile, are expected to reach some Rp 542.2 trillion by the end of the year, resulting in a deficit of Rp 26.18 trillion, or some 1 percent of this year's expected Rp 2,636 trillion gross domestic product (GDP).