Indonesia Orders 30% Cut in Travel Budget as Oil Surge Pressures State Finances
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The Indonesian government has ordered ministries and agencies to cut unspent travel spending by 30%, as higher oil prices and costly flagship programmes weigh on the country's budget. The belt-tightening reflects the challenge of funding programmes including a free meals initiative and village cooperatives while keeping the budget deficit below the legal ceiling of 3% of gross domestic product. Indonesia's budget deficit widened to 1.24% of GDP at the end of September. However, Finance Minister Suahasil Nazara said today that the government still has a chance of meeting its full-year deficit target of around 2.8% of GDP. Higher oil prices, along with rising domestic demand for fuel and cooking gas and a shift to monthly payment settlements, have pushed spending on energy subsidies and compensation up to 377 trillion rupiah, or about 21.1 billion US dollars, at the end of September, an increase of more than 50% from the same period last year. Suahasil said the average crude oil price in Indonesia is expected to rise further from its current level of 92 dollars a barrel, far above this year's budget assumption of 70 dollars a barrel, and that if oil prices climb, subsidies will have to rise in tandem. All of these factors bear directly on the state budget, and the government must shoulder these costs while ensuring that payments are made on schedule.