Jakarta. Finance Minister Purbaya Yudhi Sadewa says Indonesia may have to raise its subsidized fuel prices as a last resort if surging global oil prices driven by Middle East tensions put excessive pressure on the state budget.

Purbaya said government simulations show the state budget deficit could widen to 3.6% of gross domestic product if crude oil prices average $92 per barrel this year. The projection exceeds the government’s macroeconomic assumption for the 2026 state budget, which sets the Indonesian Crude Price (ICP) benchmark at $70 per barrel.

“If the annual average oil price rises to $92 per barrel, the deficit could reach 3.6% of GDP if we do nothing. However, we usually implement adjustment measures to ensure the deficit remains below the 3% threshold,” Purbaya said Friday at an event at the Ministry of Finance in Jakarta.

Under Indonesian fiscal law, the government must maintain the budget deficit below 3% of GDP, a rule designed to protect fiscal discipline and investor confidence.

The warning comes as global oil markets react to heightened geopolitical tensions in the Middle East. Brent crude futures were trading above $87 per barrel as of Friday, according to data from Trading Economics, already approaching levels that could strain Indonesia’s fiscal assumptions.

As a net importer of petroleum products, Indonesia faces greater fiscal pressure when oil prices rise, as the government must allocate more funds to fuel subsidies and energy compensation programs.

Purbaya said the government has prepared multiple scenarios to manage potential shocks, including one in which average oil prices reach $72 per barrel over the year.

While acknowledging the risks, he urged the public not to panic, stating that Indonesia has weathered much higher oil prices in the past.

Still, the minister acknowledged that raising domestic fuel prices could become a last-resort option if fiscal pressures intensify.

“If the budget cannot sustain the burden, there is no other choice but to share part of it with the public. That could mean an increase in fuel prices if oil rises very sharply,” he said. Indonesia's subsidized fuel, Pertalite, is priced at Rp 10,000 per liter.

Meanwhile, Indonesia’s budget has already recorded a widening deficit early in the year.

Government data shows the state budget posted a deficit of Rp135.7 trillion ($8.7 billion), equivalent to 0.53 percent of GDP, as of the end of February.

State revenue reached Rp 358 trillion during the first two months of 2026, while government spending climbed to Rp 493.8 trillion, driven partly by accelerated early-year expenditure.

Despite the deficit, Purbaya pointed to strong tax performance as a positive signal for fiscal health.

“Tax collection in the first two months of 2026 grew 30%, and we expect it to remain stable going forward,” he said.

The government continues to target economic growth between 5.5% and 6% in the coming years, following an expansion of 5.11% last year.

Economist Syafruddin Karimi of Andalas University said rising oil prices represent a real fiscal risk rather than a temporary shock.

“As oil prices move above the government’s assumptions, pressure on the state budget immediately appears through subsidies and energy compensation,” Syafruddin said.

He added that prolonged geopolitical conflict could trigger broader macroeconomic effects for Indonesia, including currency weakness, rising logistics costs, and higher food prices.

Add as a preferred source on Google +