Rising Oil Prices Inflate 2018 Energy Subsidies to Rp 163 Trillion

The government predicts that energy subsidies this year will swell due to the rising price of global crude oil, the lack of electricity tariff (tdl) increases, and the weakening of the Indonesian Rupiah against the US dollar. As is known, the 2018 APBN (State Budget) macroeconomic assumptions pegged the Indonesian Crude Price (ICP) at US$48/barrel and the Rupiah exchange rate at Rp 13,400/US dollar. However, currently, Brent crude oil is priced at US$71.8/barrel, and the Rupiah is traded at Rp 14,400/US dollar.

According to the government's report on the 2018 APBN, the realization of subsidy spending during the first half of 2018 reached Rp 73.94 trillion, or approximately 47.3% of the APBN. This amount consists of energy subsidies of Rp 59.51 trillion and non-energy subsidies of Rp 14.43 trillion. The prognosis for the second half of the year estimates energy subsidies at Rp 103.98 trillion and non-energy subsidies at Rp 50.22 trillion.

This year's energy subsidies are projected (outlook) to surge by Rp 68.97 trillion to Rp 163.49 trillion, or 173% of the APBN. Meanwhile, non-energy subsidies will increase by Rp 2.95 trillion to Rp 64.65 trillion, or 104.78% of the APBN. As a result, total government subsidies this year will increase by Rp 71.86 trillion to Rp 228.15 trillion, or 145.98% of the APBN.