Indonesia's Fiscal Position Already Vulnerable Before Conflict; Energy Price Surge Could Widen Budget Deficit

JAKARTA — Indonesia’s fiscal resilience in 2026 is assessed to already be in a vulnerable condition even before the outbreak of conflict involving the United States, Israel and Iran.

Awalil Rizky, an economist at Bright Institute, stated that such a conflict could further strain the State Budget and Expenditure (APBN), particularly through surges in energy and food prices.

Awalil revealed that Indonesia’s fiscal condition has already faced several pressures since 2025, evident from weakening state revenues and rising government spending requirements.

“Indonesia’s fiscal resilience in 2026, based on 2025’s performance, is actually already quite vulnerable, even before the war occurred. State revenues have declined and remain difficult to increase significantly,” said Awalil to Kompas.com on Tuesday (10 March 2026).

Additionally, the government must also bear the burden of debt repayments from previous periods, which have been increasing over recent years.

Furthermore, Awalil assessed that the government actually already understood various global risks from the outset, such as trade tariff policies, global liquidity tightening and escalating geopolitical tensions.

However, according to him, Indonesia is considered to have not yet demonstrated sufficiently strong fiscal risk mitigation measures compared to several other countries.

“The condition of global uncertainty was actually already known to the government. Many countries have a sense of crisis and are implementing risk mitigation, whilst Indonesia appears not yet to have taken adequate steps,” he said.

Rising energy prices, particularly oil, will directly impact the APBN by increasing spending requirements, especially for energy subsidies.

In the 2026 Financial Notes and Draft Budget, Awalil said the government had indeed presented sensitivity analyses regarding changes to basic macroeconomic assumptions, including oil prices.

In the simulation, it was stated that each one dollar increase in Indonesia crude price (ICP) per barrel could potentially add approximately 3.5 trillion rupiah to state revenues, but on the other hand would also increase government spending by around 10.3 trillion rupiah.

Accordingly, Awalil concluded that such an oil price increase could actually widen the APBN deficit by approximately 6.8 trillion rupiah.