JAKARTA, Indonesia: Indonesia retains adequate fiscal space after deciding to keep subsidised fuel prices unchanged until the end of the year, even as global oil prices rise amid conflict in West Asia.
World Bank’s chief economist for East Asia and the Pacific Aaditya Mattoo, said the country’s fiscal position remains relatively strong, with the 2025 deficit below three per cent of gross domestic product (GDP) and government debt at around 40 per cent of GDP.
“Indonesia shows a tendency towards fiscal prudence and thus has the capacity to continue providing support through energy subsidies, both implicitly and explicitly,” he said, according to ANTARA News Agency on Wednesday.
However, Aaditya stressed that subsidies should be better targeted to reach lower-income groups as well as vulnerable segments of the middle class.
He said support should also extend to small businesses and parts of the medium enterprise segment to cushion economic pressures, while urging improvements in subsidy delivery mechanisms to avoid excessive long-term fiscal burdens.
“A more targeted subsidy design will reduce fiscal risks and prevent long-term pressures that could hamper economic recovery,” he said.
On April 6, Finance Minister Purbaya Yudhi Sadewa said subsidised fuel prices would remain unchanged until year-end, noting that the government had assessed the resilience of the state budget under various oil price scenarios.
He added that Indonesia has additional buffers beyond the state budget, including a budget surplus fund (SAL) of about 420 trillion rupiah (approx. RM123.5 billion), with 200 trillion rupiah (approx. RM58.8 billion) placed in banks, as well as non-tax state revenues from the energy and mineral resources sector. – BERNAMA
