Indonesia will shield public from ‘ big shock’ as oil prices jump — Finance chief

JAKARTA — The Indonesian government will protect the public from any “big shock” from soaring global oil prices by raising subsidies, its finance minister had said on Tuesday.

Net oil importer Indonesia has allotted 94.5 trillion rupiah ($6.7 billion) for energy subsidies this year, based on an average Indonesia crude price of $48 a barrel and an exchange rate of 13,400 rupiah to the dollar.

But that doesn’t take into account Brent crude futures gaining nearly 20% this year to around $80 a barrel and the rupiah weakening to more than 14,000 to the dollar.

The rising crude prices mean Jakarta will get extra oil and gas revenues this year and some of that additional income will be allocated to energy subsidies, Sri Mulyani Indrawati told a news conference.

“We will try to maintain people’s purchasing power so that they are protected from a big shock,” Ms. Indrawati said.

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The government is still calculating how much it needs to set aside to keep energy prices unchanged for consumers, she said.

The government said in March it would keep power tariffs for poor households and some fuel prices flat until 2019, a move critics said was aimed at increasing the popularity of President Joko Widodo ahead of an election next year.

The finance ministry estimated such measures would cost Jakarta 8.1 trillion rupiah in additional subsidies in 2018, but it was then assuming average crude prices at $50-$60 a barrel.

Ms. Indrawati said she is also monitoring the impact of rising oil prices on the finances of state oil and gas company Pertamina and state electricity company Perusahaan Listrik Negara, to make sure both are able to maintain healthy balance sheets.

Ms. Indrawati said earlier this month the 2018 fiscal deficit may end the year at 2.14% of gross domestic product, below an initial forecast of 2.19%, in part due to rising oil and gas revenues.

For next year, the government expects Indonesian crude prices to average $ 60-$ 70 a barrel, with the rupiah exchange rate at 13,700-14,000 a dollar, according to a preliminary budget document submitted to parliament last week. —