Jakarta resists a fuel price hike as rising oil costs strain the budget
Indonesia has ruled out a fuel price increase for now, choosing to shield consumers even as the war in the Middle East drives oil prices sharply higher and puts new pressure on state finances.
Government Rejects Price Hike
Indonesia said on March 31 that it would not raise fuel prices from April 1 for either subsidised or non-subsidised fuel, despite growing fiscal pressure from the Middle East war. Presidential spokesman Prasetyo Hadi said the government guarantees both fuel availability and affordable prices, while urging the public not to panic over misinformation about a pending increase.
Subsidy Burden Is Growing
The decision is significant because Indonesia remains a net oil importer even though it is also an oil producer, and it relies heavily on fuel and natural gas subsidies to protect domestic consumers. The 2026 fuel subsidy bill is set at about US$12.3 billion, around 5 percent of the annual state budget, and was calculated using an assumed global oil price of US$70 per barrel. With oil prices now above US$100, the burden on the budget is rising quickly.
Budget Risks Are Hard to Ignore
Analysts have warned that Indonesia may eventually be forced to adjust its approach because the country is legally required to keep its fiscal deficit below 3 percent of gross domestic product. That makes the current stance politically popular but economically difficult to sustain if global energy prices remain elevated. Previous fuel price hikes have triggered mass unrest in Indonesia, which helps explain why the government is being cautious even as the pressure mounts.
Other Savings Measures Are Already Emerging
Rather than lifting prices immediately, Jakarta has started looking for savings elsewhere. The government earlier said it was seeking up to 80 trillion rupiah in budget efficiencies, equivalent to approx. S$6.40 billion using your required conversion rate, and has considered measures such as work from home for government staff, cuts to official travel, and encouragement of bicycles, electric cars, and public transport to preserve fuel. It also announced a one-day-per-week reduction to its free school meals plan in areas without high malnutrition risk.
Growth Ambitions Meet Energy Reality
The fuel decision also lands at a delicate moment for President Prabowo Subianto, who wants to lift Indonesia’s economic growth rate from 5.1 percent in 2025 to 8 percent by 2029 through strong public spending. Keeping fuel affordable may help households and contain social tension in the short term, but it also deepens the challenge of balancing growth ambitions with fiscal discipline as the global energy crisis worsens.
Indonesia’s refusal to raise fuel prices shows how sensitive energy policy remains in Southeast Asia’s largest economy. For Indonesians, the move offers short-term relief from higher living costs, but it may also mean tougher savings measures elsewhere if oil prices stay high. For Singaporeans, the decision is a reminder that energy shocks in the Middle East can quickly reshape economic policy across the region, affecting budgets, transport costs, and broader market stability.
Sources: Straits Times (2026) , Peninsula Qatar (2026)
Keywords: Indonesia Fuel Prices, Energy Subsidy, Prasetyo Hadi, Prabowo Subianto, Oil Prices, Budget Deficit, Fuel Policy
