Jayanty Nada Shofa, Jakarta – Indonesia's freshly announced major energy purchase with the US can backfire on its government spending and oil trade deficit, according to an analyst.
President Prabowo Subianto and his American counterpart Donald Trump recently reached an agreement to have the US reciprocal tariffs on Indonesian goods dropped from 32 percent to 19 percent. In return for a significantly lower tariff rate, Indonesia is willing to make major American energy imports worth up to $15 billion, among other concessions. Senior economist Bhima Yudhistira told the Jakarta Globe on Wednesday that the deal was not a win-win, saying that it could worsen Jakarta's oil trade deficit trend.
Indonesia's oil and gas imports had exceeded its exports by approximately $7.7 billion in the first five months of 2025, official statistics showed. The deficit has continued on a monthly basis since January 2024.
"We need to watch out for the worsening of the oil and gas trade deficit. It will likely put pressure on the Indonesian rupiah, and even cause a steep hike in energy subsidies for the 2026 fiscal year", Bhima warned.
According to Bhima's calculations, Indonesia might need to allocate between Rp 300 trillion to Rp 320 trillion (or up to $19.6 billion) in its annual state budget for energy subsidies, especially if the archipelagic country plans to increase its fuel imports. This is already a huge gap compared to the Rp 203.4 trillion in energy subsidies set for this year. The Finance Ministry data revealed Rp 87 trillion of those subsidies – meant to keep energy prices affordable – would go to liquefied petroleum gas (LPG), a type of fuel gas that Jakarta was planning to acquire from the US.
"Amidst a possibility of a worsening oil and gas deficit in the future, it's best for Indonesia to quickly shift away from fossil fuel. Our dependence on energy imports already puts pressure on government spending. Of course, it would be worrisome if Indonesia has no choice but to buy American energy because they are bound to a trade deal, especially if American energy is more expensive than market prices", Bhima said.
Under the tariff deal, Indonesia has allowed American goods to enter its market tariff-free. Jakarta also promised to purchase $4.5 billion in American farm products and 50 Boeing jets, many of them being the wide-body airliner 777s. While Prabowo admitted that Trump was a tough negotiator, the ex-defense minister said the government had "calculated everything".
"We need to import gas and fuel. This is where our two interests meet", Prabowo told the press in Jakarta on Wednesday, shortly after returning from his foreign trip.
Prior to the deal's announcement, state-run energy firm Pertamina had signed three memoranda of understanding (MoUs) with American business partners. They were oil majors ExxonMobil, Chevron, as well as KDT Global Resources, a trading firm specializing in energy products. Pertamina's spokesman Fadjar Djoko Santoso told the Globe last week that the MoUs were related to optimizing the feedstock or crude oil for national energy security.
"We are also exploring the possibility of other areas of cooperation related to the downstream refinery investment", Fadjar said via text, although he said the documents were so far only general agreements and had yet to touch on the monetary value of the partnerships.
Source: https://jakartaglobe.id/business/indonesias-15-billion-us-energy-import-can-backfire-analyst-warn