BKF estimates continuing oil price slump could widen budget deficit

BKF estimates continuing oil price slump could widen budget deficit

Illustrated photo of a miniature of oil pump printed 3D and a monitor display of stock exchange written "$ 0 Barrel" (20/4/2020). ANTARA / REUTERS / Dado Ruvic / Illustration / aa.

Changes in the ICP will have an impact on the APBN, given its price assumption in Perpres No. 54 of 2020 is 38 US dollars per barrel for an average price during 2020
Jakarta (ANTARA) - The Finance Ministry's Fiscal Policy Agency (BKF) has projected that the continuing drop in global oil prices could add up to Rp12.2 trillion to the country’s budget deficit.

According to BKF's statement received in Jakarta on Wednesday, the projection occurred if the Indonesian crude oil price (ICP) was lower than the assumed ICP set in Presidential Regulation (Perpres) No. 54 of 2020.

"Changes in the ICP will have an impact on the APBN, given its price assumption in Perpres No. 54 of 2020 is 38 US dollars per barrel for an average price during 2020," according to the press statement.

Hence, if the global oil prices continue to decline, so that the ICP becomes US$30.9 per barrel on average a year, then the deficit is expected to increase by Rp12.2 trillion.

The government continues to monitor anticipatory policies, including deficit control, one of which is through the evaluation of nonproductive spending.

Moreover, the government will take mitigation measures to maintain fiscal sustainability and economic growth.

On the occasion, the BKF stated that the price of crude oil had declined since the start of the year due to global economic activity affected by the COVID-19 outbreak.

Prices continue to decline since Monday (Apr 13), especially West Texas Intermediate (WTI) types, triggered by declining global demand and negative sentiment from the world economy.

The May contract price for WTI fell into negative territory -- minus $US37 a barrel, thereby necessitating producers to immediately hand over stock to consumers owing to limited storage factors.

However, this condition is expected to have a short-term impact, taking into account the fact that the selling price of WTI contract in June was still around US$20 per barrel.

Meanwhile, the current Indonesian crude oil price is still slightly above the price of Brent oil.


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