World Bank: 20 Percent of Indonesia's Richest Households Enjoy Half of Total Fuel Subsidies

The World Bank, through its June 2026 edition of the ‘Indonesia Economic Prospects’ report, noted that half of the total fuel subsidies disbursed by the Indonesian government are enjoyed by the wealthiest 20 percent of households. This poor targeting has been highlighted by the World Bank, particularly amidst the current surge in global oil prices, which is eroding the Indonesian government’s fiscal space and increasingly burdening the state budget through the fuel subsidy allocations. “Where the richest 20 percent of households actually receive half of the total fuel subsidies,” as quoted from the June 2026 ‘Indonesia Economic Prospects’ report. The World Bank highlighted this condition because the weakness in fuel subsidy targeting has added to the government’s fiscal burden amid the current global oil price surge. According to the institution, energy subsidies have become a significant and volatile component of public spending, reaching 1.6 percent of national Gross Domestic Product. This is a major drain on fiscal resources within the national budget due to a subsidy system deemed poorly targeted. Therefore, the World Bank recommends the Indonesian government implement a three-part fuel subsidy reform package. First, it includes gradual price adjustments to narrow the gap between subsidised prices and market prices. Second, the provision of direct cash assistance, targeted at the poorest 40 percent of households to offset the resulting impact. The World Bank estimates the nominal amount of monthly assistance would not impose an excessive fiscal burden, as it would only be about 10 percent of the total fuel savings. Third, the reallocation of fuel subsidy savings towards social protection activities, public investment, and providing livelihood support for affected groups. According to the World Bank, such an approach would generate fiscal savings equivalent to 1.3 percent of GDP if implemented gradually over the next two years. It is expected that fiscal space will eventually grow to reach 2.1 percent of GDP after the price adjustment policy is fully implemented.