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High oil prices put new strains on state budget
Oil prices have exceeded US$120 per barrel, double the assumption in the state budget.
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An oil and gas rig on the Offshore Northwest Java (ONWJ) Block and operated by state-owned firm Pertamina is pictured in this undated photo. (SKK Migas/Handout)
S
urging global oil prices have put fresh strains on the state budget as the government seeks to balance higher subsidy spending with fiscal consolidation plans.
International oil benchmark Brent exceeded US$120 a barrel on Monday, double the $63-per-barrel assumption in the 2022 state budget, as the Ukraine crisis exacerbated a rise in oil prices that had stemmed from the global economic recovery from the pandemic.
Global oil prices are one of six fundamental macroeconomic assumptions used to compile the state budget. These assumptions also include inflation and oil and gas production figures.
“This is an emergency. There should be an early warning, and ministries need to discuss the alternatives,” said natural resources researcher Komaidi Notonegoro, executive director at ReforMiner Institute, on Wednesday.
The surge in oil prices comes just as Indonesia enters the last leg of its fiscal consolidation plan, which entails reinstating a budget deficit ceiling of 3 percent of gross domestic product (GDP) by 2023. The ceiling was lifted to allow Indonesia to fund COVID-19 relief efforts.
In this year’s state budget, the government allocated Rp 455.62 trillion (US$31.8 billion) for economic recovery programs and Rp 77.5 trillion for liquefied petroleum gas (LPG) and diesel subsidies, with the assumption that oil prices would stand at $63 per barrel.
The Finance Ministry has claimed that Indonesia will gain a net benefit from high oil prices, with every $1 increase supposedly raising revenue by Rp 3 trillion and spending by Rp 2.6 trillion, netting a Rp 400 billion surplus.
