Black Hole Or Black Gold? The Impact Of Oil And Gas Prices On Indonesia's Public Finances

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Executive Summary

Indonesia's oil revenues and fuel subsidies dominate the nation's economic policy agenda. This paper estimates the impact of higher international oil prices on the Indonesian government's fiscal position in 2008 and beyond. It analyzes the interactions between government revenues and expenditures, as well as international oil prices, energy subsidies, and inter-governmental transfers. International crude oil prices have risen fourfold over the past five years. This has significantly impacted the fiscal position of many developing economies. Net energy-exporting economies have enjoyed significant growth in government revenues and hence fiscal space, as their governments' tax and non-tax incomes from energy production have expanded or government-owned energy producers have paid higher dividends.

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