High oil prices threaten state budget
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).