Where is the Energy Subsidy Being Redirected?

The 2017 Indonesian National Budget (APBN) allocated Rp 77.3 trillion for energy subsidies. This figure is down Rp 273 trillion, or 77.93 percent, compared to the 2014 budget of Rp 350.3 trillion. This reduction in energy subsidies during President Joko Widodo's administration was redirected to fund more productive development in infrastructure, education, and healthcare.

Between 2014 and 2017, the infrastructure budget surged by 117.7 percent to Rp 387.3 trillion, the healthcare budget increased by 54 percent to Rp 104 trillion, and the education budget also grew by 10.8 percent to Rp 416.1 trillion. These three budgets saw a combined increase of Rp 286 trillion during the same period that energy subsidies decreased by Rp 273 trillion.

As is known, the government raised the price of subsidized fuel (BBM) at the end of 2014 because it was deemed inefficiently targeted. The reasoning was that many affluent individuals were still purchasing subsidized fuel, specifically Premium gasoline. The savings from reduced energy subsidies were redirected to fund more productive budgets. The result is that infrastructure development is currently widespread and distributed throughout the Indonesian archipelago.