Purbaya: Subsidised Fuel Prices Will Definitely Rise If Oil Price Surges Burden the State Budget

Finance Minister Purbaya Yudhi Sadewa said the government could raise the price of subsidised Bahan Bakar Minyak (BBM) if the surge in world oil prices persists and begins to threaten the State Budget (APBN). He stressed that such a step would only be taken if the fiscal position could no longer withstand pressures from global energy prices. ‘If indeed the budget is not very strong, there is no other option, we share with the public to some extent. That means there will be an increase in BBM,’ Purbaya told media briefing at the Ministry of Finance office in Jakarta on Friday.

However, he underlined that increases in subsidised BBM prices are not the primary option. The government would first pursue a series of mitigations to prevent the oil price pressure from widening the APBN deficit. The Ministry of Finance projects the deficit could reach 3.7% of GDP if world oil prices stay at $92 per barrel throughout the year without policy interventions. To prevent a widening deficit, the government is preparing a number of policy adjustment options.

One step under consideration is reallocating state spending, particularly on programmes deemed to have lower urgency. But Purbaya confirmed that spending with direct impact on the public would remain a priority and would not be moved. For example, he cited possible adjustments to the MBG (Makan Bergizi Gratis) programme. He said budget adjustments would not touch the core programme of providing food to the public, but would affect supporting activities not directly linked to the programme’s main objective. ‘MBG is a good programme, but we want to prevent spending that does not directly support the provision of meals, such as buying motorcycles,’ Purbaya said.

Purbaya added that Indonesia has experience dealing with higher oil prices in the past, when world oil prices briefly reached $150 per barrel. At that time the domestic economy slowed but held. ‘We have gone through a period when oil prices reached $150 per barrel. It slowed somewhat, but did not collapse. So we have experience,’ he said.

The recent rise in world oil prices is driven by heightened geopolitical tensions in the Middle East amid the Iran–US–Israel conflict. Brent crude rose 4.93% to $85.41 per barrel, while West Texas Intermediate (WTI) gained 8.51% to $81.01 per barrel. These levels are well above January 2026 averages of about $64 and $57.87 per barrel, respectively.

Nevertheless, the Ministry of Energy and Mineral Resources (ESDM) said subsidised BBM prices remain stable for now and the national energy supply is safe ahead of Idul Fitri. The article also notes that the Treasury minister indicated THR for civil service employees is expected to be paid within about a week.”