World Bank urges Indonesia to phase out blanket fuel subsidies as spending reaches 1.6% of GDP

Indonesia should gradually phase out blanket fuel subsidies and replace them with targeted cash transfers to poorer households to cut fiscal risks and improve fairness, the World Bank said. The lender said more than half of current subsidies go to the richest 20% of households, while energy subsidy spending is 1.6% of GDP and remains a “significant and volatile” item in public outlays. The government has largely kept pump prices, including subsidised Pertalite, flat despite higher global oil prices and a weaker rupiah, increasing budget pressure. The report recommended shifting from universal fuel subsidies to time-bound cash transfers targeted to the poorest 40% of households.