The country has tripled its subsidy budget to 502 trillion rupiah ($34 billion) this year to keep prices of gasoline, diesel and some power tariffs unchanged, and ministers said they are assessing how any rise would impact inflation and growth.
The government is reviewing its options, including adjusting prices, Coordinating Minister for Economic Affairs Airlangga Hartarto told a news conference.
"In this review, the government is calculating the potential impact on inflationary pressure and also its effect on the GDP going forward," Airlangga said.
Authorities are also setting up rules to deter those who can afford non-subsidised fuel from buying subsidised gasoline, energy minister Arifin Tasrif said.
State energy firm Pertamina said as of July, it had sold 9.9 million kilolitres of subsidised diesel, about two-thirds of the total quota for the year, while sales of subsidised gasoline had reached 16.8 million kilolitres, or 73% of 2022's quota.
Finance Minister Sri Mulyani Indrawati told the same news conference on Tuesday that the state subsidy budget may swell further due to rising demand for such fuels.
For 2023, the government has proposed to parliament 336.7 trillion rupiah of energy subsidies and compensations, assuming crude oil price would drop to around $90 per barrel and consumption volume of subsidised fuels could be maintained near this year's quota.
"We think the 2023 state budget may have already incorporated at least 20% increase in Pertalite fuel price," said Satria Sambijantoro, an economist at Bahana Securities, referring to Pertamina's subsidised gasoline brand.
He noted that the government is cutting the energy subsidy by 33% next year while only assuming a 10% drop in crude oil price.
($1 = 14,740.0000 rupiah)
(Additional reporting by Bernadette Christina, Ananda Teresia, Gayatri SuroyoEditing by Kanupriya Kapoor and Bernadette Baum)
By Stefanno Sulaiman and Fransiska Nangoy
