Subsidised fuel prices will rise if the national budget cannot keep pace with world oil prices

Jakarta VIVA – Finance Minister Purbaya Yudhi Sadewa said that subsidised fuel (BBM) prices would rise if global oil prices continue to soar and exceed the capacity of the state budget (APBN). ‘If indeed the budget is not very strong, there is no other way, we would share part of the burden with the public. In other words, there would be an increase in BBM,’ he said at a media briefing at the Ministry of Finance in Jakarta on Friday. However, he stressed that any increase would only occur if the APBN is no longer able to balance the pressure of world oil prices. According to Purbaya, the Ministry of Finance’s calculations show the APBN deficit could reach 3.7 percent of gross domestic product (GDP) if oil prices stay at US$92 per barrel throughout the year and there is no government intervention. However, Purbaya assured he would take mitigative steps so that pressure from world oil prices does not widen the APBN deficit. Besides adjusting BBM prices, another option available is the realocation of state expenditure. Some programme budgets with low urgency could be moved to meet fiscal health needs. Expenditure that directly impacts the public would not be shifted and would remain a priority. He cited the Makan Bergizi Gratis (MBG) programme as an example of an area with some room for budget realignment. The shift would not affect the programme’s core function of providing food, but would pertain to supporting activities, such as the provision of motor vehicles for the Satuan Pelayanan Pemenuhan Gizi (SPPG). ‘MBG is a good programme, but we want to prevent spending that does not directly support the food aspect, for example buying motorbikes,’ said the Finance Minister. Furthermore, Purbaya said Indonesia had previously faced even greater pressure from world oil prices, with records approaching around US$150 per barrel. The national economy managed to withstand that pressure. Purbaya is optimistic that this phase of oil price surges can also be navigated. ‘We have previously passed through a situation where oil prices reached up to US$150 per barrel. Did the economy fall? It slowed somewhat, but did not fall. So we have experience,’ he said.