English
Indonesia expects fiscal pressure from high global fuel, food prices
HIGH global commodity prices have helped Indonesia book a strong fiscal position, but its budget will face pressure from inflationary shocks in coming months as the government keeps fuel prices steady, the finance minister said on Monday (Mar 28).
Net oil importer Indonesia has made state energy firm Pertamina keep prices of its most widely used fuels unchanged, despite surging global oil prices due to the Russia-Ukraine war.
The country has also left unchanged electricity tariffs and liquefied petroleum gas prices for households.
The cost of keeping prices stable, however, has yet to be reflected in the latest budget report, which only covered the first 2 months of 2022 and showed a 19.7 trillion rupiah (S$1.9 billion) budget surplus due to strong revenue collection.
That compared with a 63.3 trillion rupiah deficit in the same period last year.
“On the one side, our budget now is looking quite positive, but the budget will have to work much harder to protect the society from the shocks coming from commodity prices,” Finance Minister Sri Mulyani Indrawati said, adding that spending, especially on subsidies, will rise.
South-east Asia’s largest economy has allotted 134 trillion rupiah for energy subsidies this year. It spent 21.7 trillion rupiah in January and February.
On top of subsidies, the government typically compensates Pertamina and state power utility PLN for losses from certain types of sales.
Sri Mulyani said the government still owes Pertamina and PLN 109 trillion rupiah in compensation from 2020 and 2021.
Separately, Pertamina’s chief executive Nicke Widyawati told Parliament on Monday that demand for subsidised diesel fuel is expected to reach 16 million kilolitres this year – 14 per cent above quota – due to improving economic activity and targeted subsidies amid widening price disparity.
Pertamina is also considering buying Russian crude “at a good price”, Nicke said. REUTERS