Jakarta. Indonesia needs a better-targeted rollout of energy subsidies, according to an analyst, as the weakening rupiah crossed the Rp 17,700 mark on Tuesday.

The protracted US-Iran war, coupled with the subsequent energy price hikes, has dragged the rupiah to record lows. While the government continues to strike an optimistic tone, economist Achmad Nur Hidayat sounded the alarm. The government should act quickly, including ensuring that energy subsidies are going to the people in need as intended.

“Energy subsidies must be better targeted, not eliminated. Safeguarding the people’s purchasing power is the government's responsibility,” Achmad told the Jakarta Globe.

“But having the subsidies leak to the rich is wasteful. Because of it, our state budget is the first victim every time the oil price rises. When our state budget is under pressure, it’s rupiah that pays the price along with all Indonesians,” Achmad said.

The government has repeatedly treated the subsidies as what they call a “shock absorber” amid volatile energy prices.

Indonesia’s spending for subsidies and compensation totaled Rp 118.7 trillion ($6.7 billion) as of end-March 2026. Some Rp 52.2 trillion ($2.9 billion) had flowed into subsidizing crude and liquefied petroleum gas (LPG), among others, the Finance Ministry reported.

Drops in the rupiah are feared to take a toll on energy subsidies as Indonesia mainly pays their fuel imports using the dollar. Even so, Laode Sulaeman, a senior official at the Energy Ministry, said that the prices of subsidized LPG would remain the same.

“There will be no changes until the year-end,” Laode said, as reported by the state news agency Antara.

As of Tuesday 10.43 a.m. Jakarta time, the rupiah had plunged to Rp 17,728 per dollar, Bloomberg spot market data showed. Achmad reminded the government to be extra careful with its words. President Prabowo Subianto had recently caught flak for saying that “villagers do not use dollars” in what seemed to be an attempt to cool down public panic.

“Villagers may not transact in dollars, but the price of fertilizers, fuel, LPG, medicines, production, equipment, and almost all necessities are heavily influenced by global exchange rate and energy prices,” Achmad said.

“The dollar is invisible in rural markets, but its traces are present in every transportation cost, agricultural input price, and daily living cost.”