Is Indonesias fuel subsidy sustainable as Iran war continues?
Indonesia could face a sharp fiscal squeeze if the US-Israel war on Iran pushes oil prices higher, analysts warn, as this risks inflating the country’s fuel subsidy bill at a time when global ratings agencies and investors are already scrutinising Jakarta’s budgetary discipline. A prolonged war could force policymakers into a difficult choice: maintain fuel…
A prolonged war could force policymakers into a difficult choice: maintain fuel subsidies and risk breaching the legal deficit ceiling – potentially unsettling investors further – or cut funding to keep the budget within limits but fuel inflation instead.
The government has already allocated 210.1 trillion rupiah (US$12.4 billion) for energy subsidies this year, a 14.5 per cent increase from last year’s budget.
