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Jakarta Post

Oil price slump a double-edged sword for Indonesia, Sri Mulyani says

  • Adrian Wail Akhlas

    The Jakarta Post

Jakarta   /   Mon, March 9, 2020   /   04:42 pm
Oil price slump a double-edged sword for Indonesia, Sri Mulyani says Indonesia Minister of Finance Sri Mulyani Indrawati speaks during a panel discussion on financial inclusion at the 2016 Annual Meetings of the International Monetary Fund Headquarters and the World Bank Group on Oct. 7, 2016, in Washington, DC. (AFP/Zach Gibson)

Low oil prices may be a double-edged sword for Indonesia after Saudi Arabia started a price war with Russia by slashing its selling prices and pledging to boost supply amid falling demand due to the coronavirus outbreak.

Finance Minister Sri Mulyani Indrawati said on Monday that the current price war amid the weakening economy due to the outbreak may benefit Indonesia's imports as a result of lower oil prices. Brent crude futures fell by the most since 1991 on Monday, by US$14.25 or 31.5 percent to $31.02 per barrel.

The current circumstance may ease state-owned oil producer Pertamina’s oil import burden, she added.

“The positive side is the price of energy will be relatively cheap,” Sri Mulyani told reporters in Jakarta. “However, this could lead to bigger uncertainty in the capital market.”

Read also: Oil plunges about 30% after Saudi Arabia slashes prices, opens taps

Global share markets tumbled on Monday as panicked investors fled to bonds to hedge the economic shock of the coronavirus and the oil price slump.

Sri Mulyani added that the government would continue to monitor the low oil price situation and its potential impact on the state budget.

“For the state budget, in revenue from oil, as I said, we are facing low prices, and volume is also down because exports and production are declining, as well as the currency rate,” she pointed out. “We will assess its impact on this year’s state budget as well as the assessment for 2021.”

Read also: Indonesia’s 2019 budget deficit widens to 2.2 percent amid tax revenue short fall

Saudi Arabia, the world’s biggest oil exporter, is attempting to punish Russia, the world’s second-largest producer, for balking on Friday at production cuts proposed by the Organization of the Petroleum Exporting Countries (OPEC).

OPEC and other producers supported the cuts to stabilize falling prices caused by the economic fallout from the coronavirus outbreak.

Saudi Arabia plans to boost crude output above 10 million barrels per day (bpd) in April after the current supply deal between OPEC and Russia – known as OPEC+ – expires at the end of March, according to Reuters.