JAKARTA: Indonesia’s economy minister said Monday (Apr 13) the Southeast Asian nation can outlast the impacts of Middle East war-fuelled oil price hikes for as many as 10 months without cutting fuel subsidies.
Minister Airlangga Hartarto told foreign media in Jakarta his government “is ready for five, six, or even ten months” on current projections.
“Diesel, as well as … propellant, will be subsidised until the end of the year,” he said. “And the government has sufficient funds for it.”
Global crude prices have soared to more than US$100 per barrel since the United States and Israel unleashed a series of strikes on Iran on Feb 28, sparking a region-wide conflict and the effective closure of the crucial Strait of Hormuz.
Indonesia is an oil producer but nevertheless a net importer, and it heavily subsidises fuel consumed domestically.
The subsidy covers about 30 to 40 per cent of the cost for consumers and absorbs over 5 per cent – some 210 trillion rupiah or US$12 billion – of the annual budget in Southeast Asia’s most populous nation and largest economy.
Jakarta’s 2026 fuel subsidy calculation was premised on a global oil price of US$70 per barrel, and the government is legally required to keep the fiscal deficit at no more than 3.0 per cent of GDP.
Airlangga said Monday that every US dollar increase in the global oil price adds a burden of about 6.8 billion rupiah (some US$400 million) on the state budget.
The country imported between a fifth and a quarter of its oil from the Middle East, but is seeking alternatives in Africa, the United States and Venezuela, he added – though the details were being finalised.
“Some of the other (Middle Eastern) oil can be substituted by these multiple sources,” he said.
Much government planning depends on “how long the war will be”, said Airlangga, and accused US President Donald Trump of “playing yo-yo” with “war and peace”.
