Rupiah Under Pressure – Oil Prices Surge, Here's the Latest on Indonesia's State Budget
Jakarta – The Directorate General of Economic and Fiscal Strategy (DJSEF) at the Ministry of Finance has outlined the current state of Indonesia’s State Budget (APBN) as pressure on the rupiah-dollar exchange rate intensifies amid surging global crude oil prices.
According to Refinitiv data from Monday 9 March 2026, the rupiah was traded at Rp16,980 per US dollar, nearly breaching the psychological level of Rp17,000 per US dollar, though it recovered to Rp16,935 per US dollar at market close.
Global oil prices surged sharply on Monday morning, with Brent crude reaching US$113.68 per barrel and West Texas Intermediate (WTI) at US$113.25 per barrel. This represents a dramatic increase from late February 2026, when Brent was trading at US$70.85 and WTI at US$65.42.
These currency and commodity movements have exceeded the macroeconomic assumptions underpinning the 2026 APBN, as specified in Law Number 17 of 2025. The original assumptions projected a rupiah-dollar rate of Rp16,500 per US dollar and crude oil at US$70 per barrel.
Wahyu Utomo, Director of State Budget Strategy at DJSEF, attributed the exchange rate and crude oil pressures to the outbreak of conflict between Iran, the United States, and Israel in the Middle East, which began on 28 February 2026.
“The geopolitical conflict in the Middle East will impact crude oil prices (ICP) and other commodity prices such as coal, palm oil, and nickel, leading to pressures on exchange rates, interest rates, and ultimately economic growth,” Wahyu stated to CNBC Indonesia on Monday 9 March.
Wahyu explained that the effects of the conflict on both exchange rates and crude oil prices will have direct implications for the APBN across revenue, expenditure, financing, and ultimately the budget deficit.
The 2026 APBN Law projects state revenue of Rp3,153.6 trillion and state expenditure of Rp3,842.7 trillion, resulting in a designed deficit of Rp689.1 trillion, equivalent to 2.68 per cent of gross domestic product (GDP), to be financed through borrowing.
Whilst the APBN structure will be directly affected by rupiah-dollar movements and oil prices, Wahyu noted that effects would not be calculated daily but rather on an annual average basis. Should the conflict remain short-lived, he maintained that the 2026 APBN posture can be maintained.
As of end-February 2026, budget realisations showed a deficit of Rp135.7 trillion, or 0.53 per cent of GDP, with total financing of Rp164.2 trillion, representing 23.8 per cent of the annual target. State expenditure had reached Rp493.8 trillion (12.8 per cent of the 2026 budget design) whilst state revenue totalled Rp358 trillion.
“The impacts affect revenue, expenditure, and financing. As long as the conflict does not extend beyond the short term, the APBN deficit will remain manageable,” Wahyu affirmed.
Wahyu emphasised that such fiscal pressures from conflicts affecting currencies and oil prices are not new to Indonesia. Similar conditions occurred during the Ukraine-Russia conflict, which escalated when Russia invaded Ukraine in late February 2022. At that time, crude oil prices breached US$100 per barrel and the rupiah exceeded the psychological level of Rp15,000 per US dollar. However, the pressures proved temporary, allowing the fiscal position to be maintained within the safe limits of the State Finance Law, with the deficit ultimately reaching 2.38 per cent of GDP.
“Looking at the experience during the Ukraine-Russia war, it was temporary in nature, so APBN calculations rely on annual averages. Even though prices spike currently, the average impact may not be as large, and so far impacts remain manageable,” Wahyu explained.
Nevertheless, economists are urging the government to take swift action to anticipate the currency and oil price pressures with direct fiscal implications.
Myrdal Gunarto, Global Markets Economist at Maybank Indonesia, warned that the sharp oil price increase over the past four to five days is a signal for the government to implement fiscal strategy adjustments. He argued the government should prioritise budget allocation and adjust expenditure to match current state revenue. The government could also pursue budget rationalisation, particularly for energy subsidies.
“If oil prices rise, energy subsidies must be re-evaluated. The government must decide whether to increase energy subsidy allocations by cutting other budget items, or to continue raising subsidies provided state revenue also increases,” Gunarto stated.
Josua Pardede, Chief Economist at Permata Bank, cautioned that oil prices exceeding US$100 per barrel combined with the rupiah weakening to Rp17,000 per US dollar would create substantially larger budget deficits.
“In our simulation, if oil reaches US$100 per barrel and the rupiah is at Rp17,000 per US dollar, additional budget pressure reaches approximately Rp208 trillion,” Josua noted.