The government recorded a budget surplus of Rp5.7trn in the first quarter of 2011. The government has targeted a full-year deficit of Rp125trn, equivalent to 1.8% of GDP. The first-quarter surplus came despite rising expenditure on fuel subsidies, which reached Rp18.1trn as a result of rising oil prices, higher consumption of subsidised fuels and falling domestic oil production. Consumption of subsidised fuel rose by 6.9% year on year in the first quarter, to 9.7m kilolitres. To accommodate the pressure this has placed on the public finances, the Ministry of Finance announced in April that it was planning to revise the oil price assumptions used in the 2011 state budget. The assumed oil price is likely to be raised to US$100/barrel, from US$80/b, while forecast net domestic oil production is likely to be cut to 945,000 barrels per day, from 970,000 b/d previously. In April the finance minister, Agus Martowardojo, warned that rising oil prices may lead to a higher budget deficit this year, but that some of the losses associated with higher oil prices would be offset by gains in the rupiah:US dollar exchange rate. The rupiah has appreciated over 5% against the US dollar so far in 2011, standing at close to Rp8,500:US$1 at end-April. The exchange rate used in the budget forecasts is expected to be adjusted from its current level of Rp9,250:US$1 to Rp9,000:US$1. The finance ministry estimates that the budget deficit increases by Rp800bn for every US$1 increase in oil prices, while the deficit is reduced by Rp1.7trn for every appreciation of Rp100 (1 US cent) in the rupiah:US dollar exchange rate.

The government raised US$2.5bn through a ten-year US dollar-denominated bond issued in April, at a yield of 5.1%. Given that orders worth US$6.9bn were received, the issuance was heavily oversubscribed, reflecting continued high demand for Indonesian assets. Bids from the US accounted for 49% of orders, followed by Asia (29%) and Europe (22%). In its previous approach to international debt markets, in January 2010, Indonesia raised US$2bn through a ten-year US dollar bond, at a yield of 6%. The lower yield achieved this year reflects stronger investor interest and a promising long-term outlook for the economy. Officials have also cancelled plans to issue a yen-denominated Samurai bond. The finance ministry cancelled the sale owing to concerns over Japan's need for domestic financing for reconstruction in the aftermath of the disaster in March.