World Bank: Indonesia's Fiscal Condition Remains Stable Amid Global Energy Price Surge

The government faces a policy dilemma with no truly comfortable options. The World Bank assesses Indonesia’s fiscal condition as still relatively strong, even though the government has decided to maintain subsidised fuel oil (BBM) prices until the end of 2026. This policy is being implemented amid rising global oil prices triggered by escalating geopolitical tensions between the United States, Israel, and Iran. Aaditya Mattoo, the World Bank’s Chief Economist for East Asia and the Pacific, explained that Indonesia’s fiscal position remains within safe limits. This is reflected in the 2025 fiscal deficit, which is below 3% of gross domestic product (GDP), and the government debt ratio, which stands at around 40% of GDP. “Indonesia demonstrates a tendency towards fiscal prudence, thus having relatively ample capacity to continue providing support through energy subsidies, whether implicitly or explicitly,” he stated on Wednesday (8/4). Nevertheless, Mattoo emphasised that the distribution of subsidies must become increasingly targeted. He highlighted the importance of ensuring that such assistance truly reaches poor communities and vulnerable middle-class groups most affected by economic pressures. Additionally, he assessed that support needs to be extended to small business actors, and even some medium-sized enterprises, so they are not further burdened by challenging economic conditions. According to him, the government needs to continuously improve the subsidy distribution mechanism to optimise its benefits without creating excessive pressure on future finances. A more directed policy design is deemed capable of mitigating long-term risks while maintaining the momentum of economic recovery. “The more targeted the support, the smaller the risk to the fiscal burden,” he said. Meanwhile, Finance Minister Purbaya Yudhi Sadewa previously assured that subsidised BBM prices will remain stable until the end of this year. The government, he said, has anticipated various scenarios for global oil price increases, including if they reach US$80 to US$100 per barrel. In addition to relying on the state budget (APBN), the government also has other funding sources to cushion such pressures. One of them comes from the budget surplus balance (SAL) amounting to Rp420 trillion, including Rp200 trillion placed in the banking sector. Not only that, various state revenue sources are also seen as additional supports, such as non-tax state revenues (PNBP) from the energy and mineral resources sectors. “So, (subsidised BBM) is safe until the end of the year. So, people outside don’t need to fuss or worry; we’ve already calculated it,” said Purbaya during a working meeting with Commission XI of the House of Representatives (DPR RI) in Jakarta on Monday (6/4). In the April 2026 edition of the East Asia and Pacific Economic Update report released by the World Bank, Indonesia’s economic growth for 2026 is projected to reach 4.7%. This figure is slightly lower than the previous estimate of 4.8%. Despite the slight revision, this projection is still higher than the average economic growth for the East Asia and Pacific region, estimated at 4.2%.