Jakarta. Indonesia is attempting a delicate balancing act of keeping domestic fuel prices steady while global prices soar, without blowing a hole in the state budget.

Finance Minister Purbaya Yudhi Sadewa insists the math adds up. Even if crude averages $100 (Rp 1.69 million) a barrel this year — well above the $70 assumption in the 2026 State Budget — the fiscal deficit will remain at around 2.9% of GDP, just shy of the legal 3% ceiling.

According to the government’s own estimate, every $1 increase in oil prices adds roughly Rp 6 trillion to the deficit. Yet Purbaya argues that the buffers are sufficient and the fiscal health intact. “We have calculated everything,” he said in Jakarta on Wednesday. “Even at $100 per barrel, the deficit stays below 3%. It is manageable.”

The policy choice at the heart of this calculation is to hold retail fuel prices steady — at least for now. That decision shifts the burden from consumers to the state and, in the short term, to Pertamina, the national oil firm. With government compensation payments to Pertamina flowing more regularly — covering roughly 70% of claims each month — the company's balance sheet is deemed strong enough to absorb the gap between regulated prices and market costs.

To make the numbers add up, the government is quietly tightening elsewhere. Ministries and agencies are being nudged through successive rounds of austerity measures, trimming non-essential outlays. Even without additional savings — such as from work-from-home arrangements — the deficit target, officials say, remains within reach. Any further efficiencies would be a bonus.

Behind Purbaya's confidence is a sizeable fiscal buffer. Indonesia’s surplus budget balance (SAL) stands at around Rp 420 trillion, a reserve built up over previous years. For now, Purbaya is reluctant to touch it. The fund is an emergency backstop, not a routine financing tool. “We will not use it unless we are truly under pressure,” he said.

Not everyone is convinced the strain will remain containable. Syafruddin Karimi, an economist of Andalas University, warns that the budget’s original assumptions are already out of date. The 2026 energy subsidy allocation of Rp 381.3 trillion was calibrated to an oil price of around $70 a barrel and an exchange rate of Rp 16,500 to the dollar. Oil is now hovering above $100, and a weaker rupiah, hovering near Rp 16,990, alters the equation dramatically.

Syafruddin’s said the burden could swell by as much as 50% relative to initial projections. Even allowing for mitigating measures — caps on subsidized fuel volumes, spending cuts, and diversified LPG supply — the additional fiscal load could run into hundreds of trillions of rupiah.

Holding fuel prices down shields households and businesses from inflationary shocks, especially in a country where energy costs feed quickly into food and transport prices. But the protection comes at a price: the state absorbs what the market would otherwise impose.

The gap between administered and “economic” prices is already wide. Estimates suggest that the subsidized Pertalie fuel would need to retail at between Rp 12,500 and Rp 13,500 per liter to reflect current costs. For Pertamax, the non-subsidized grade, the fair price may lie between Rp 13,800 and Rp 14,800. Keeping pump prices below those levels implies either higher subsidies, larger compensation payments, or under-recoveries borne by Pertamina.