Indonesia Cuts Oil Price Assumption as Budget Deficit Looms

(Antara Photo/F.B. Anggoro)

By : Tabita Diela | on 3:55 PM June 15, 2016
Category : Business, Economy

Jakarta. The government and the House of Representatives agreed on Wednesday (15/06) to lower the oil price assumption in the 2016 revised state budget to $40 per barrel from $50 initially, as part of efforts to reign in the budget deficit.

The average Indonesian crude price in the January to mid-June period was $36 per barrel, a not too far from the benchmark for calculating revenue and subsidy spending for the rest of the year, said Suahasil Nazara, head of fiscal policy at the Ministry of Finance.

Suahasil said for each $1 drop in the assumed crude oil price, the state deficit will widen by Rp 660 billion ($49 million). However, he noted that global fuel prices are "indeed increasing," raising hope that the country can still meet its deficit target.

Global oil prices have been rallying in the past six months as production declines due to political turmoil in producer countries such as Libya, Nigeria and Venezuela.

US crude fell to a three-week low of $47.55 on Wednesday, while Brent, the global benchmark, was also down for a fifth day, hitting its lowest in around two weeks at $49.12 a barrel, according to Reuters.

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