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View all search resultsSomething's gotta give
With pressure building simultaneously on both the revenue and expenditure side of the budget, something has to give.
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Motorcyclists line up to refuel with non-subsidized fuel Pertamax on March 1 at a gas station in Kuningan, Jakarta. (Antara/Indrianto Eko Suwarso)
O
ur state budget plan for 2026 looked overly optimistic to begin with, so the recent increase in global energy prices only forces our government to recognize an imminent reality and rethink state revenue and expenditure.
While the budget is typically revised around mid-year, the sudden increase in oil and gas prices sparked by the United States-Israel attack on Iran calls for a swift reassessment of the macroeconomic assumptions underlying our fiscal policy.
Crude futures rose above US$90 a barrel on Friday, and many analysts expect them to reach triple digits before Washington and Tel Aviv finally end their deadly campaign.
Meanwhile, the government’s budget plan is based on an assumed average oil price of $70 a barrel throughout the year.
Every dollar above that price would drive up the state’s fuel subsidy bill by Rp 7 trillion ($414 million), according to an estimate from the Energy Shift Institute (ESI), so an average of $80 would force the government to find an extra Rp 84 trillion.
Of course, the events unfolding in Iran were impossible to predict when the budget was drafted, but the $70 figure appears overly optimistic even based on the information available in 2025.
Oil cost more than that for most of the past decade, and geopolitics was already fraught with risks, so assuming last year’s exceptionally low oil price would continue into this year left little room for unforeseen events like the situation we now have in the Middle East.
