CSIS: Subsidy Reform Is Needed In The Energy And Nonenergy Sector To Maintain The Fiscal Space Of The 2025 State Budget

Illustration. (Photo: Doc. Antara)

JAKARTA - The Center for Strategic and International Studies (CSIS) conveyed the need for changes to subsidized schemes or reforms, both in the energy sector and non-energy sectors, to maintain fiscal space in the 2025 State Budget.

Senior Researcher CSIS Deni Friawan assessed that the increasing subsidy budget from year to year adds to the burden of the state budget and is less effective in its implementation.

"Subsidi will continue to be burdensome, if we can't accompany it with an increase in revenue, what will happen is that the burden gets bigger and the debt will get bigger," Deni said during a media presentation related to the 2025 RAPBN in Jakarta, quoted from Antara, Monday, August 19.

Based on CSIS records, the total allocation of subsidies and compensation for energy in 2024 is IDR 334.8 trillion, while non-energy subsidies are IDR 96.9 trillion.

In the 2025 RAPBN, the subsidy expenditure budget is planned at IDR 309.05 trillion, consisting of energy subsidies of IDR 204.5 trillion and non-energy subsidies of IDR 104.5 trillion.

So far, according to Deni, many energy subsidies have been enjoyed by the wealthy. Then, he also assessed that the subsidy of fertilizers and agricultural tools was misused a lot and leaked to large plantations, while the impact on increasing agricultural production was less effective.

Therefore, he proposed that subsidies otherwise be directed to people not to goods so that they are more targeted.

"The reduction in energy subsidies will indeed increase inflation, but the government also needs to balance between maintaining inflation with the APBN deficit and other needs," he explained.

For the energy sector, CSIS researcher Ardhi Wardhana projects that the total subsidy and energy compensation next year is estimated to increase by seven percent compared to 2024, which is mainly due to global oil price volatility.

In addition, the assumption that Indonesia's crude price (ICP) is 82 US dollars per barrel and an exchange rate of Rp. 16,100 per US dollar will increase fuel compensation.

"Finally, subsidies need to be reviewed or further reformed, so that the problem of volatile subsidy formulation and regressivity problems is not on target," explained Ardhi.

Previously, Minister of Finance Sri Mulyani Indrawati said that the subsidy budget and compensation for the 2025 RAPBN were set at IDR 525 trillion.

The budget is disbursed through two routes, namely subsidies and energy compensation and non-energy subsidies.