Oil prices could breach the state budget deficit ceiling, economist warns of fiscal risk

The rise in world oil prices due to geopolitical tensions in the Middle East could press on Indonesia’s fiscal position. If global oil prices remain high, the deficit of the State Budget (APBN) could exceed the legal limit of 3 percent of Gross Domestic Product (GDP). Economist and Public Policy Expert at UPN Veteran Jakarta, Achmad Nur Hidayat, notes that rising oil prices affect not only domestic fuel prices but also place substantial pressure on the APBN’s posture. ‘Oil price increases ultimately tend to widen spending faster than revenue,’ Achmad said in his analysis on Sunday (8 March 2026). This assumption forms the main benchmark in calculating revenue and expenditure that relate to the energy sector. However, the government also notes fiscal sensitivity to changes in oil prices. Each US$1 per barrel rise in ICP is estimated to add about Rp3.5 trillion to state revenue, but simultaneously increase spending by up to Rp10.3 trillion. Consequently, the APBN deficit could widen by around Rp6.8 trillion if other factors are assumed to remain constant. Using these calculations, Achmad outlined several fiscal‑pressure scenarios if world oil prices rise far above the APBN assumptions. If oil prices rise to US$90 per barrel (about US$20 above the assumption), the additional pressure on the deficit could reach around Rp136 trillion. In this scenario, the government still has room to mitigate the impact through policy combinations, such as pausing subsidised fuel prices while allowing the prices of non‑subsidised fuels to adjust to the market. However, such steps carry consequences in the form of higher subsidies and energy compensation, ultimately narrowing the space for productive government spending. Fiscal risk becomes far greater if oil prices reach US$100 per barrel. A gap of around US$30 from the APBN assumption could push the deficit to around Rp204 trillion.