Minister says budget will cushion oil price spike, fuel prices unchanged

Indonesia will absorb the impact of surging global oil prices through its state budget and has no immediate plans to raise subsidised fuel prices, Finance Minister Purbaya Yudhi Sadewa said on Monday.

Global oil prices rose above $100 a barrel amid fears of prolonged supply disruptions linked to the conflict in the Middle East, well above Indonesia’s 2026 state budget assumption of $70 per barrel.

Despite the increase, Purbaya said the government would maintain its current fuel subsidy policy while closely monitoring developments over the next month before deciding whether any policy adjustment is needed.

“Even if global oil prices rise, we will absorb the shock with the budget and control the impact as much as possible,” he told reporters.

The government has allocated Rp 381.3 trillion in the 2026 state budget to fund energy subsidies and compensation for state energy firm Pertamina and electricity utility Perusahaan Listrik Negara (PLN) to keep certain fuel prices and electricity tariffs affordable.

Purbaya said the subsidy allocation could increase if oil prices remain elevated, but the government needs about a month to assess whether the current price surge is temporary.

Read also : Govt considers accelerating B50, E20 rollout as oil prices rise

 “If prices are around $100 per barrel now but later fall to about $50, the annual average could still be close to our assumption,” he said.

He added that the government still has sufficient fiscal space to maintain subsidies for now and will continue evaluating the economic impact before taking further action.

Earlier this month, Purbaya told Reuters that if crude prices reach $90–$92 per barrel this year, Indonesia’s fiscal deficit could widen to about 3.6% of gross domestic product, exceeding the legal ceiling of 3%. Under that scenario, the government would reduce spending elsewhere to stay within the limit.

For now, however, the fiscal deficit target for 2026 remains unchanged at 2.68% of GDP, Deputy Finance Minister Suahasil Nazara said.

Separately, Energy Minister Bahlil Lahadalia said Indonesia’s fuel supply remains adequate and the government has no plan to raise subsidised fuel prices at least until the end of Ramadan and the Eid al-Fitr holiday period.

Officials are also considering accelerating the rollout of the B50 biodiesel programme — a blend of 50% palm oil-based biodiesel and 50% conventional diesel — later this year to reduce reliance on imported fuel amid higher oil prices.

Editing by Reiner Simanjuntak