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Pricy oil may cost Indonesia Rp 190t more in subsidy spending

Vincent Fabian Thomas (The Jakarta Post)
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Jakarta
Wed, April 20, 2022

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Pricy oil may cost Indonesia Rp 190t more in subsidy spending This handout photo made available by Greenpeace shows one of the NGO’s activists holding an antiwar placard in front of the supertanker Pertamina Prime off the coast of Denmark on March 31, 2022. (AFP/Kristian Buus/Greenpeace)

T

he government may need to spend Rp 190 trillion (US$13.23 billion) more than planned to cover swelling subsidies as surging international oil prices drive up the cost of fuel imports.

The Energy and Mineral Resources Ministry estimates that subsidies and compensation for gasoline, diesel and liquefied petroleum gas (LPG) may swell to Rp 320 trillion this year, more than double the Rp 130 trillion assumed in the state budget plan.

Compensation differs from subsidies in that it is paid to state-owned enterprises (SOEs) after the current financial year.

The announcement comes as global oil prices are close to double the $63-per-barrel assumption that serves as the basis for the 2022 budget.

Sanctions imposed by numerous countries on Russia over its invasion of Ukraine have exacerbated a surge in oil prices that began more than a year ago when demand was rising as the global economy began to emerge from the COVID-19 pandemic.

“So, if the global oil price stays at its current level, the government is at risk of spending Rp 320 trillion on subsidies and compensation for fuel and LPG,” Energy and Mineral Resources Minister Arifin Tasrif said in a statement on Sunday.

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“That doesn't include [spending related to] electricity; maybe electricity isn't that big,” he added.

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