The 2023 State Budget Deficit Will Swell, the Government is Asked to Immediately Transform the Energy Subsidy Policy

Head of the Center for Food, Energy and Sustainable Development of Indef Abra Tattov. Photo: Screenshot/Theresia Agatha

JAKARTA - It is considered that the government needs to immediately anticipate the impact of energy subsidies on the deficit of the State Revenue and Expenditure Budget (APBN).

Head of the Center for Food, Energy and Sustainable Development Institute for Development of Economics and Finance (Indef) Abra Talattov said this was so that additional energy subsidies and compensation would not cause the 2023 state budget deficit to exceed three percent of GDP. Abra emphasized that the government needs to transform the energy subsidy policy as an anticipatory measure against this.

"The government needs to immediately transform the energy subsidy policy from an open mechanism to a closed and targeted subsidy," said Abra in an online Indef discussion, on Tuesday, February 14.

According to Abra, the revision of Presidential Decree No. 191 of 2014 concerning segmentation of subsidized fuel consumers needs to be realized as soon as possible, as well as optimizing data collection of subsidized fuel and LPG consumers through the My Pertamina platform.

"This effort can be a transitional instrument in reforming the national energy subsidy policy," he said.

With the open fuel and LPG subsidy scheme still in force in the midst of the ongoing economic recovery phase, Abra said, it would increase the risk of a spike in subsidized fuel and LPG demand. It is feared that it will exceed the subsidy quota that has been set.

"This condition is also a source of risk for the expansion of energy subsidies and compensation in the midst of a year of fiscal consolidation," said Abra.

In the midst of a situation of heightened global geopolitical uncertainty, Abra emphasized that the government must take lessons from the 2022 experience. "When energy prices soared sharply, the government increased the budget for energy subsidies by up to IDR 502.4 trillion to reduce inflation," he concluded.