The fuel subsidy budget could reach Rp698 trillion if fuel and LPG prices remain unchanged.

Soaring energy prices resulting from the Russian invasion of Ukraine have impacted the entire world, including Indonesia. The rising oil price has caused the energy subsidy budget to balloon.

Finance Minister Sri Mulyani stated that since presenting the additional subsidies and compensations for fuel (BBM) and electricity to the House of Representatives (DPR RI), crude oil prices and the Indonesia Crude Price (ICP) have not decreased. Instead, they have shown an upward trend.

“When we created Presidential Regulation Number 98 of 2022, which was discussed with the DPR RI, with an oil price of US$100 per barrel, it was clear that according to the consensus forecast and the energy organization's forecast, US$100 per barrel was lower than the likely realization,” said Sri Mulyani at a press conference following a coordination meeting of the Coordinating Ministry for Economic Affairs regarding the fuel subsidy policy, as reported on the Kemenkeu.go.id website on Friday (26/8).

“Even today, we see that oil prices are still above US$100 per barrel,” she added.

Based on data from the Ministry of Finance in the 2022 state budget (APBN), the government allocated Rp152.5 trillion for subsidies and payments. This figure surged to Rp502 trillion based on Presidential Regulation 98/2022.

If subsidized fuel and electricity prices are not increased, the government estimates that the subsidy budget will swell to Rp698 trillion. This means that this enormous sum would be wasted to keep fuel prices from rising.

The government has maintained subsidized fuel prices to maintain public purchasing power and to boost economic growth after the Covid-19 pandemic. However, if fuel prices rise, it will trigger a chain reaction of rising prices of goods, which can lead to high inflation.