Purbaya to Add Rp100 Trillion for Energy Subsidies, Widening State Budget Deficit?

Finance Minister Purbaya Yudhi Sadewa will add up to Rp100 trillion to the budget for energy subsidies. This is to anticipate the impact of conflicts in the Middle East that are disrupting the global energy supply chain and world oil prices.

Purbaya explained that the Rp100 trillion allocation is for subsidies, not compensation. The subsidy scheme from the State Revenue and Expenditure Budget (APBN) includes 3 kg LPG and diesel.

Compensation, on the other hand, involves the government or state-owned enterprises covering the difference between the government-set retail price and the market price of fuel oil (BBM). The compensation borne by the APBN is for Pertalite.

“(Rp100 trillion) that’s subsidies. Compensation is something else. I forget,” Purbaya stated.

For energy subsidies, the government has budgeted Rp210.1 trillion, or about 65.87% of the APBN. If added to energy compensation, the government must spend Rp381.3 trillion. Nevertheless, Purbaya said the APBN deficit can still be controlled.

“Even with an average (world oil price) of 100 (dollars per barrel), we’ve locked the deficit below 3%, around 2.9%,” Purbaya explained.

According to the government, the APBN still has room despite rising world oil prices. The public is urged not to worry about the potential widening of the APBN deficit.

There are several scenarios calculated regarding the rise in crude oil prices: if Indonesia’s crude oil price is around US$86 per barrel, with the rupiah exchange rate at about Rp17,000 per US dollar. If economic growth is 5.3% and the yield on government securities is around 6.8%, the APBN deficit is projected at 3.18%.

However, if the oil price is estimated at around US$97 per barrel with the rupiah weakening to Rp17,300 per US dollar, economic growth estimated at 5.2%, and government securities yield at 7.2%, the APBN deficit could rise to 3.53%. Finally, if the oil price reaches US$115 per barrel, the rupiah weakens to Rp17,500 per US dollar, and economic growth is around 5.2% with government securities yield at 7.2%, the APBN deficit is projected to widen to 4.06%. (Ant/H-4)

Purbaya noted that Pertamina is temporarily covering the fuel price difference for non-subsidised BBM while world oil prices surge, as the government holds back price increases.

Purbaya also stated that there is currently no urgency to issue a Government Regulation in Lieu of Law (Perppu) to widen the APBN deficit.