Indonesia faces trillion-rupiah budget strain from rising fuel subsidies

Indonesia is likely to see its fiscal outlook squeezed by an unexpected surge in demand for subsidised Pertalite fuel, which experts say could cost the state around Rp 32.8 trillion in the next twelve months. Hadi Ismoyo, an advisory board member of the Society of Indonesian Petroleum Engineers, based his estimate on a 12% increase in Pertalite volumes—about 3.6 million kiloliters—driven by consumers shifting from pricier Pertamax.

Using a crude price of $110 per barrel and an exchange rate of Rp 18,000 per US dollar, the production cost works out to Rp 19,100 per litre, while the subsidised price remains near Rp 10,000, leaving a gap of Rp 9,100 per litre that the government or Pertamina must cover. The Coordinating Downstream and Energy Transition Minister Bahlil Lahadalia confirmed that crude prices have consistently topped the budgeted figure, so additional subsidies and compensation are expected.

The shortfall will vary month to month with oil price fluctuations. This added fiscal pressure arrives as Indonesia seeks to balance energy affordability with a volatile global oil market.