Finance Minister Purbaya Vows to Curb Impact of Global Oil Price Volatility

Jakarta: Finance Minister Purbaya Yudhi Sadewa vowed to continue mitigating the impact of global oil price volatility to prevent it from burdening people’s purchasing power. 

The policy will be supported by maintaining the existing energy subsidy scheme and optimizing what the government considers sufficient fiscal space. 

The measure is being prepared to anticipate the risk of a surge in global crude oil prices, which could reach USD 100 per barrel amid rising geopolitical tensions in the Middle East.

“So when prices started to rise, the president asked me to calculate the impact if global oil prices reached USD 100 per barrel. If we leave it unchecked, can it be controlled? Yes. People’s purchasing power can be protected by absorbing the increase in global oil prices through subsidies,” Purbaya said at the Sarasehan 100 Ekonom Indonesia at the Kempinski Grand Ballroom in Jakarta on Thursday, September 3, 2026.

The government is optimistic that the energy subsidy intervention will not undermine fiscal stability. The state budget deficit is expected to remain safely below the strict three-percent threshold. 

Non-Priority Spending Efficiency

To support the subsidy burden without significantly widening the deficit, the Finance Ministry is planning to restructure government spending. The government will cut operational spending deemed less productive and reallocate the funds to strengthen social protection and stabilize energy prices. 

By mid-year, the state budget had shown considerable resilience. Efficient spending and strong state revenue collection have given the government sufficient fiscal room to cushion the impact of external shocks stemming from the global crisis. 

“We are controlling unnecessary spending while allowing more productive expenditures to continue. Based on our calculations, the deficit will remain below three percent, at around 2.85 percent. This will ensure fiscal sustainability remains intact,” Purbaya explained.

Through a combination of internal spending cuts and maintaining energy subsidies, the government aims to keep the domestic economy stable and ensure household consumption is not disrupted by developments in international markets. 

(Razaqa Hariz)