Indonesia is preparing to set aside as much as 80 trillion rupiah, equivalent to approximately $4.7 billion, in an effort to safeguard its economy from the adverse effects stemming from the escalating conflict in the Middle East. This strategic financial cushion is part of the government’s broader plan to mitigate the economic shocks caused by rising global oil prices, which have surged following recent US-Israeli strikes on Iran and Tehran’s retaliatory actions in the Gulf region.
As the largest economy in Southeast Asia, Indonesia is particularly vulnerable to fluctuations in energy costs, given its substantial population of over 284 million people and the significant role fuel subsidies play in its national budget. To address this, the government is actively exploring various fuel-saving initiatives, including the possibility of implementing a policy that would allow government employees and certain public sector workers to work remotely one day per week. This measure aims to reduce overall fuel consumption and ease the pressure on the country’s energy resources.
In a recent interview recorded last week, President Prabowo Subianto discussed potential adjustments to the country’s budget priorities in light of the current geopolitical tensions. The former military general emphasized that the administration is committed to making every possible effort to reduce costs by cutting down on energy usage and simultaneously accelerating the development of renewable energy sources, with a particular focus on solar power. This dual approach reflects Indonesia’s ambition to balance immediate economic needs with long-term sustainability goals.
Adding further clarity to the government’s financial strategy, presidential spokesman Prasetyo Hadi revealed that the administration is targeting savings of up to 80 trillion rupiah. Although he did not specify the exact sources of these savings, this figure was confirmed by the presidential office on Monday, underscoring the seriousness with which the government is approaching the economic fallout from the Middle East conflict. It is important to note that despite these cost-cutting efforts, the government has firmly stated that key social programs, such as Prabowo’s flagship free meals initiative—which has a budget allocation of $19.7 billion for 2026—will remain fully funded and unaffected.
Moreover, the government continues to uphold its substantial fuel subsidy program, which currently covers between 30 to 40 percent of fuel costs for consumers and accounts for roughly 15 percent of the national budget. This subsidy is a critical element of the administration’s strategy to maintain social stability and support economic growth, which President Prabowo aims to increase from 5.1 percent last year to an ambitious target of 8 percent by 2029, largely driven by public expenditure.
Unlike several neighboring countries, Indonesia has so far avoided the widespread fuel shortages and long queues at petrol stations that have become common elsewhere due to soaring oil prices. President Prabowo highlighted that there remain numerous additional cost-saving measures that the government can implement to further protect the economy. Meanwhile, the administration is finalizing its remote work policy and plans to announce the details to the public in the near future, signaling a proactive approach to energy conservation amid ongoing global uncertainties.
