Indonesia Weighs Fuel Subsidy Adjustments Amid Rising Oil Prices

Jakarta, Indonesia – The Indonesian government is considering adjustments to fuel oil (BBM) subsidies as sustained increases in global oil prices threaten the country’s state budget. Finance Minister Purbaya Yudhi Sadewa indicated that if oil prices remain elevated, the government may need to share the burden with consumers through price increases.

Rising Oil Prices and Fiscal Deficit Concerns

The potential for a widening fiscal deficit prompted the government to simulate various scenarios based on increasing world oil prices. According to Minister Sadewa, if the average oil price reaches $92 per barrel, the budget deficit could rise to 3.6 to 3.7 percent of GDP without intervention. Kompas.com reported on this assessment on March 6, 2026.

Government Strategies to Mitigate the Impact

The government is exploring several options to keep the deficit below the 3 percent of GDP limit. These include adjusting state spending by postponing or shifting non-urgent programs and prioritizing expenditures with a direct impact on the population. However, adjusting subsidized fuel prices remains a possibility if budgetary pressures intensify.

“If the budget is not very strong, there is no other way, then we will share some of it with the community. This means there will be an increase in fuel costs if that is the case,” stated Purbaya.

Geopolitical Factors Driving Oil Prices

The recent surge in global oil prices is linked to escalating geopolitical tensions in the Middle East, specifically disruptions to operations at Saudi Aramco’s Ras Tanura refinery following a drone attack amid the Israel–Iran conflict.

Recent Leadership Changes

Purbaya Yudhi Sadewa was appointed as Minister of Finance on September 8, 2025, replacing Sri Mulyani Indrawati as part of a cabinet reshuffle under President Prabowo Subianto. Kompas.id detailed the cabinet changes, which also included appointments for ministers of Perlindungan Pekerja Migran, Koperasi, Haji and Umroh, and a Wakil Menteri Haji dan Umroh.

Prior to his appointment as Minister of Finance, Purbaya Yudhi Sadewa served as the Head of the Indonesia Deposit Insurance Corporation from September 3, 2020, to September 8, 2025. Wikipedia provides a biographical overview of his career.

Blacklisting Controversy

Minister Purbaya recently announced a decision to blacklist Dwi Sasetyaningtyas, an awardee of the LPDP DS scholarship, preventing her from holding any position within the government. This decision followed a viral social media post by Sasetyaningtyas that sparked public debate. Kompas.com reported on this development on February 23, 2026.