The recent increase in fuel prices, which has attracted widespread public attention, is the latest example of the orthodoxy of public spending, which peaked after the pandemic. The volatility in global commodity prices has opened up the burden of State Budget (APBN) management: tied spending, especially debt and bureaucratic spending, continues to reign despite the drastic increase in the need for social protection from inflation and saving the business world from recession. Increasing fuel prices amid pressure from domestic prices and people’s efforts to recover after the pandemic are the preferred response to rising world oil prices, even though fiscal space allows other alternatives.
The increase in world oil prices since the beginning of 2022 has increased the burden of subsidies and energy compensation in the 2022 State Budget from 162.0 trillion to 510.1 trillion IDR. In other words, the change in the assumption of crude oil prices from US$ 63 per barrel to US$ 100 per barrel will give an additional fiscal burden of 348.1 trillion IDR. But, at the same time, as Indonesia is a significant exporter of commodities such as palm oil, coal to nickel, global commodity prices have also significantly increased state revenues, estimated at 420.1 trillion IDR.
