Southeast Asia’s largest economy has tripled this year’s energy subsidy budget to 502 trillion rupiah (34.2 billion USD) in order to keep some fuel prices and power tariffs unchanged and manage inflation. However, this may not be enough as nearly all of the subsidised fuel quota has already been used, according to the finance ministry.
If the government has to increase the quota for subsidised gasoline to 29 million kilolitres from 23 million kilolitres and assuming oil prices stay elevated and the rupiah weak, the subsidy bill can rise to up to 600 trillion rupiah, Lahadalia said at a recent news conference.
He also noted that it was unwise to spend 25% of the government revenues on subsidies. According to him, the government is bearing a heavy burden, adding that it’s time for agencies to find solutions to keep the country’s fiscal position healthy.
Earlier on August 10, Finance Minister Sri Mulyani Indrawati said she has asked state energy firm Pertamina to limit sales of subsidised fuels.
Economists have criticised the government's decision to increase subsidies this year, saying it would take money away from projects with bigger economic impacts.