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Finance Minister Sri Mulyani stated that Indonesia's energy subsidy spending in 2022 will be greater than the previous year.

The increase in energy subsidy spending is expected to occur in line with the economic recovery from the impact of the Covid-19 pandemic, increased consumption of fuel and LPG, and rising global energy commodity prices.

"Last year there was already a rise in commodities, such as fuel which had already increased, but there was no price change. Some even received electricity discounts," said Sri Mulyani at the Our State Budget Conference on Monday (28/3/2022).

"Until now, there has been no change in energy prices; the impact is that subsidies will be larger," she added.

Comparison of Global Vehicle Fuel Subsidy Values

Globally, Indonesia is among the largest providers of vehicle fuel subsidies after Iran, Saudi Arabia, Algeria, Egypt, and Venezuela.

According to data from the International Energy Agency (IEA), in 2020, Indonesia's vehicle fuel subsidy amounted to US$2.49 billion, making it the sixth largest in the world.

The global value of vehicle fuel subsidies in 2020 decreased compared to the previous period because global energy commodity prices weakened that year. Fuel consumption also plummeted due to widespread mobility restrictions related to the Covid-19 pandemic.

The IEA itself believes that fuel subsidies should not be increased further, as they are considered to hinder the development of new and renewable energy (NRE).

"The IEA has long advocated for the elimination or at least reduction of fossil fuel subsidies because they distort markets, send the wrong price signals to consumers, widen fiscal deficits in developing countries, and prevent the adoption of cleaner renewable energy," the IEA wrote on its official website.

(Also Read: Indonesia's Energy Subsidies Exceed Rp100 Trillion/Year since 2018)