Indonesia's Finance Minister Confident in Maintaining a 2.9% Deficit as Energy Subsidies Balloon by $6.3 Billion

JAKARTA, Investortrust.id — Indonesia is signaling a "steady as she goes" approach to its fiscal management. Finance Minister Purbaya Yudhi Sadewa stated on Wednesday that the nation’s 2026 budget deficit will remain anchored at 2.9% of GDP, despite the dual headwinds of volatile global crude prices and a massive expansion in state spending for energy price caps.

Speaking during a doorstep interview at Wisma Danantara on April 1, 2026, Purbaya noted that the government’s projections now factor in a "worst-case" average oil price of $100 per barrel. "Our mindset is to assume that high oil prices are here to stay for the year. We are adjusting policy to keep the deficit controlled at 2.9%," he said.

This commitment is a vital signal to international markets. This policy shift is the government's determination to maintain its reputation for fiscal prudence while avoiding the social unrest that typically follows fuel price hikes. By choosing to absorb the costs rather than pass them to the consumer, Jakarta is betting that its "rainy day" funds are deep enough to outlast a protracted conflict in the Middle East.

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The $26.5 Billion Safety Net

The linchpin of this strategy is the government’s accumulated cash surplus, or unspent funds remaining from previous fiscal years, known as SAL. This reserve currently stands at Rp420 trillion (approx. $26.5 billion), providing a significant cushion.

Purbaya explained that every $1 increase in the price of oil typically adds Rp6 trillion ($378 million) to the national deficit. However, he cited stronger-than-expected revenue streams and a multi-phase efficiency drive within government ministries as reasons for his optimism. "Last year’s performance proved we have the capacity to suppress the deficit even when things look tight," the Minister added.

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Managing the $6.3 Billion Subsidy Spike

The decision to freeze fuel prices comes at a steep price. The Ministry of Finance expects energy subsidies and compensation costs to balloon by an additional Rp90 trillion to Rp100 trillion ($5.7 billion to $6.3 billion).

The 2026 budget originally earmarked Rp210.1 trillion ($13.2 billion) for energy assistance, including electricity and 3kg LPG cylinders. However, with the Iran-Israel conflict driving market prices higher, the gap between the pump price and the market price has widened significantly.

Pertamina’s Liquidity and the Price Gap

Currently, the state-owned energy giant PT Pertamina (Persero) is acting as the front-line shock absorber. As of April 1, the market "economic price" for Pertamax (RON 92) is estimated at Rp17,850 per liter ($4.27 per gallon), yet the government has mandated it stay at Rp12,300 per liter ($2.94 per gallon).

This creates a shortfall of roughly Rp5,550 ($0.35) per liter. Purbaya assured that Pertamina’s balance sheet remains robust enough to handle the delay in full reimbursement. "The government is now paying 70% of the compensation on a rolling monthly basis," he said. "Their liquidity is healthy; for the short term, this is not an issue."

While Pertamina remains protected by state cash flows, the situation for private retailers like Shell or BP remains fluid. Purbaya noted that those operators would need to coordinate their pricing and margin strategies with the Ministry of Energy and Mineral Resources (ESDM).