Indonesia’s oil and gas import bill surged 40.2 per cent year on year to US$25.8 billion in the first seven months of 2026, as higher global energy prices increased pressure on the country’s public finances and external accounts. Government subsidies have shielded households from much of the price shock, but the cost of keeping domestic energy affordable has risen sharply.
An analysis by The Business Times of Statistics Indonesia data found that the increase in import expenditure far outpaced the 10.9 per cent rise in physical import volumes. The country’s oil and gas trade deficit consequently widened 78.2 per cent to US$18.8 billion over the same period.
Economists say Indonesia has several buffers against the shock, including government subsidies and earnings from commodity exports. Higher coal and palm oil prices have helped offset some of the pressure from more expensive oil imports, although the government has had to absorb a growing share of the additional energy costs.
Subsidies and compensation payments reached 331.4 trillion rupiah (US$18.4 billion) through August, an increase of 52.1 per cent from a year earlier, as the government limited the impact of rising international prices on consumers.
Data from Bank Indonesia (BI) showed that the pressure intensified in the second quarter. The value of oil imports climbed to US$11.6 billion from US$7.3 billion in the first quarter, even as import volumes declined to 88 million barrels from 90 million. Spending on refined petroleum products rose to US$7.8 billion from US$4.4 billion, while volumes increased more modestly to 57 million barrels from 54 million.
BI attributed the higher import bill to rising international oil prices following the outbreak of conflict in the Middle East on 28 February. Brent crude climbed from US$72.48 a barrel on 27 February to a peak of about US$126 in April. It was trading at around US$107.31 on 19 October, approximately 48 per cent above its pre-conflict level, according to Bloomberg data.
The energy shock has also affected Indonesia’s external accounts. The current-account deficit widened to US$12.5 billion, equivalent to 3.3 per cent of gross domestic product, in the second quarter, from US$3.6 billion, or 1 per cent of GDP, in the first three months of the year. BI attributed the deterioration partly to higher oil imports, alongside stronger non-oil imports and larger services and income deficits.
However, Maybank Securities economist Brian Lee said the impact was “more significant for the fiscal position than for the external accounts”, noting that Indonesia remained a major commodity exporter. Higher coal and palm oil prices, he said, were benefiting two of the country’s largest export categories as alternative energy feedstocks became more valuable. Lee expects the current-account deficit to average 2 per cent of GDP in 2026.
For households, fuel subsidies and administrative measures have limited direct increases in domestic fuel and energy prices. OCBC senior Asean economist Lavanya Venkateswaran said this had shifted the burden towards public finances, the exchange rate and the balance of payments.
The increase in subsidy spending has also exceeded the growth in subsidised consumption. Volumes of subsidised fuel rose 8.8 per cent, while consumption of subsidised three-kilogram liquefied petroleum gas cylinders, widely used for household cooking, increased 2.6 per cent.
The government has incorporated higher energy costs and a weaker currency into its 2027 Budget assumptions, using an Indonesian crude price of US$75 a barrel and an exchange rate of 17,500 rupiah to the US dollar, compared with US$70 and 16,500 rupiah in the 2026 Budget. The Finance Ministry’s September update put this year’s average Indonesian crude price at US$89.20 a barrel and the average exchange rate at 17,415 rupiah per US dollar.
Lee cautioned that the revised assumptions could still prove optimistic if current conditions persisted. Nevertheless, he said Indonesia retained “meaningful buffers”, with the 2027 fiscal deficit target of 2.4 per cent of GDP remaining below the statutory ceiling of 3 per cent.
The currency and inflation pressures could complicate monetary policy even as subsidies restrain retail energy prices. BI has raised interest rates three times this year by a combined 100 basis points, bringing its benchmark rate to 5.75 per cent. OCBC expects one further increase of 25 basis points in 2026, while forecasting economic growth of 5.2 per cent this year and 5 per cent in 2027.
Venkateswaran said the main warning sign would be “a simultaneous deterioration across external accounts, fiscal metrics, and market confidence”, adding: “This is not our base case.”
