Indonesia Alerts to Soaring Energy Subsidies Budget

By Editorial Team 17/04/2024
energy subsidy
Summary

The Iran-Israel conflict is poised to significantly impact the state budget (APBN), particularly concerning energy subsidies. Tutuka Ariadji, the Energy and Mineral Resources Ministry's Director General of Oil and Gas, stated that the heating up geopolitical tensions in the Middle East could inflate energy subsidy budgets by up to 50 percent.

Nevertheless, Tutuka emphasized that the government has not considered adjusting oil and liquefied petroleum gas (LPG) prices. "We should proceed step by step in terms of policy, in terms of preparing for the worst-case scenarios," he said on Tuesday, Apr. 16. Tutuka mentioned that the government, in collaboration with PT Pertamina (Persero), has already conducted simulations on the increase in energy subsidy budgets triggered by the Middle East conflict.

Here's a simulation of the subsidy increase calculation assuming an Indonesia Crude Price (ICP) of US$100 per barrel and an exchange rate of Rp 15,900 per US$:

  • Subsidies and compensations for fuel: Rp 160.91 trillion (APBN 2024) to Rp 249.86 trillion.
  • LPG subsidies: Rp 83.27 trillion (APBN 2024) to Rp 106.28 trillion.
  • Total fuel and LPG subsidies budget: Rp 244.18 trillion (APBN 2024) to Rp 356.14 trillion.

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