Why the State Budget Could Run a Deficit If the US–Iran War Widens

The state budget (APBN) is at risk of running a deficit if the war between the United States and Israel versus Iran widens. A surge in global oil prices forces the government to shoulder the gap for energy subsidies and compensation.

Under the 2026 APBN macro assumptions, the oil price projection was set at US$70 per barrel. But on 3 and 4 March 2026, global oil prices breached US$80 per barrel, higher than at the outset of the aggression on Saturday 27 February 2026, when it remained at US$70 per barrel.

Secretary of the Coordinating Ministry for Economic Affairs Susiwijono Moegiarso stated that the APBN would bear additional burdens even though the oil price rise is only US$1. ‘For every one dollar increase in ICP (Indonesian Crude Price), from the spending side we must add Rp 10.3 trillion in spending due to energy subsidies,’ he said at a discussion forum organised by UOB Indonesia in South Jakarta on Monday 2 March 2026.

Susiwijono said every US$1 per barrel increase could also raise APBN revenue by about Rp 3.6 trillion, derived from non-tax state revenue (PNBP) from the oil and gas sector (migas).

Nevertheless, the state treasury remains in the red because the revenue difference is smaller than the extra spending that must be disbursed.

‘So our expenditure increases by Rp 10.3 trillion for each US$1 rise in oil price; after that we receive Rp 3.6 trillion. So a deficit of around Rp 6.7 trillion for each US$1 rise,’ he said.

The war in the Middle East disrupts the global logistics supply chain. Not only oil prices, but all global communities will be affected, leading to price increases. In the end, inflation will rise. ‘Prices will certainly rise not only for energy, but also for industrial input materials which we mostly import,’ he said.

UGM economics lecturer Fahmy Radhi said the rise in global oil prices will create a dilemma for the government. If fuel subsidies are not raised at the consumer level, the APBN burden to cover the price gap will swell. But if the government raises prices at the consumer level, inflation will occur. ‘Because the largest BBM consumers are Pertalite and solar. So this is indeed a hard choice for the government,’ he said.