Jakarta. Reforming Indonesia’s energy subsidies would strengthen fiscal credibility, ease pressure on the state budget, and support President Prabowo Subianto’s energy transition agenda, according to policy experts.

Ruddy Gobel, Senior Policy Advisor at the Center for Policy Development, said subsidy reform would send a positive signal to financial markets that the government is committed to improving the country's fiscal position.

“Subsidy reform would help strengthen fiscal credibility and signal to the market that the government is improving its fiscal condition, which would have a positive impact on the rupiah,” Ruddy said.

He argued that Prabowo’s administration is in a stronger position to implement energy subsidy reforms because much of the groundwork has already been laid by previous governments.

The government has already tested several subsidy-reform measures, including the MyPertamina app for fuel purchases and biometric verification technology to better identify eligible subsidy recipients. At the same time, rising financial inclusion and wider adoption of digital payments have improved the infrastructure needed to distribute subsidies more accurately.

Ruddy added that improvements in the National Socio-Economic Single Data System (DTSEN) would further support efforts to ensure subsidies reach intended beneficiaries.

“Our fiscal space is limited. Resources should therefore be directed toward productive and transformative programs that can encourage investment and accelerate the energy transition,” he said.

International Institute for Sustainable Development (IISD) Senior Policy Advisor Anissa Suharsono echoed the same thing, saying that energy subsidy reform has become increasingly urgent.

An IISD study showed that Indonesia’s energy subsidy and compensation spending reached Rp 118.7 trillion ($6.58 billion) in the first quarter of 2026, a 266.5% increase from the same period a year earlier.

Anissa said that the subsidy burden could continue to rise amid higher global energy prices and a weakening rupiah. Maintaining the current subsidy mechanism would further strain fiscal space and leave Indonesia more vulnerable to external economic shocks, she said.

Fluctuations in the rupiah exchange rate could also add pressure to the state budget by increasing the cost of energy imports and compensation payments.

“By adopting a more targeted subsidy mechanism, the government can provide greater support to those who genuinely need it while reducing the fiscal burden. This approach is also more likely to remain politically sustainable over the long term,” Anissa said.

She added that better-targeted subsidies would not only safeguard fiscal health but also create more room for the government to finance productive programs, including efforts to accelerate the transition to cleaner and more sustainable energy sources.

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