World Bank Highlights 20 Percent of Wealthy Citizens Enjoy Fuel Subsidies
The World Bank has recommended reforming fuel subsidies amid soaring global oil prices. In its latest report, the World Bank highlighted that wealthy Indonesians are enjoying subsidised fuel intended for low-income communities.
The recommendation is contained in the World Bank’s Indonesia Economic Prospect (IEP) report for the June 2026 edition. “The surge in global oil prices has exposed the fiscal burden and weaknesses in fuel subsidy targeting, where 20 percent of the wealthiest households actually receive half of the total fuel subsidies,” the report stated on Sunday, 14 June 2026.
The World Bank assesses that oil price shocks are also burdening the budget and eroding fiscal space. Disruptions to the oil market and logistical issues have kept Brent crude oil prices high at around US$94 per barrel, or US$24 above the assumption used in the 2026 State Budget.
This condition creates an opportunity to implement fuel subsidy reform. Therefore, the World Bank suggests three sequential reform elements that the government needs to undertake. The first is a gradual and pre-announced adjustment of fuel prices, aimed at reducing the gap between subsidised fuel prices and market prices.
The next recommendation is to provide targeted direct cash assistance to the poorest 40 percent of households to offset the resulting impact. According to the World Bank, the nominal amount of monthly assistance would not impose an excessively large fiscal burden, amounting to only 10 percent of the total fuel subsidy savings.
The final step is the transparent reallocation of fuel subsidy savings towards social protection activities, public investment, and livelihood support for affected groups.
The fiscal savings from this approach are expected to accumulate over time, equivalent to 1.3 percent of gross domestic product in the first two years, rising to 2.1 percent once the price adjustment policy is fully implemented.
The World Bank advises a gradual, sequenced implementation, clear public communication, and system readiness through the National Single Social and Economic Data (DTSEN). The government also needs to apply transparent calculations on how fuel subsidy savings will be reinvested to build the trust needed to sustain the reform.