Indonesia's fiscal deficit in 2010 is estimated to have been much smaller than was forecast when the House of People's Representatives (DPR, the legislature) approved the state budget in September 2009 and made revisions in May 2010. Speaking on January 3rd 2011 Mr Yudhoyono said that the deficit for the year stood at the equivalent of only 0.6% of GDP, compared with the original projection of 1.6% and the revised projection of 2.1%. Mr Yudhoyono gave no reason for the smaller than expected shortfall, but speaking in December, the finance minister, Agus Martowardojo, had singled out the slow pace of government expenditure. Underspending by government ministries is a significant problem in Indonesia. Capital spending is typically affected more severely than routine spending (for example on wages and subsidies), with the result that development of the country's infrastructure is often neglected. However, spending on subsidies is also estimated to have fallen short of target in 2010. Fuel subsidies are estimated to have totalled around Rp61trn (US$6.7bn), compared with the budgeted figure of Rp74.6trn, a result of the international price of oil (dated Brent Blend) falling below the annual average of US$80 per barrel assumed in the revised budget, and of the rupiah's annual average exchange rate against the US dollar being stronger than the assumed Rp9,200:US$1. The saving on fuel subsidies was achieved despite domestic oil production falling short of the targeted level and consumption of subsidised fuels exceeding their allocated quota. Consumption of subsidised fuels rose to 38.5m kilolitres, well above the 36.5m-kilolitre quota, while domestic oil production fell to 954,000 barrels/day, compared with the target of 965,000 b/d, owing to technical problems at a major oilfield in Riau province.

The government expects to record a wider deficit in 2011. According to the state budget, which was approved by the DPR in October, the deficit is expected to widen to the equivalent of 1.8% of GDP. However, the government may not be able to count on another year of subsidy savings. In early January oil was trading at around US$95/barrel, compared with the price of US$80/b assumed in the budget. Despite this, the co-ordinating minister for the economy, Hatta Radjasa, has ruled out an increase in the retail price of fuel this year. Instead, he said that the government would continue to focus on managing supplies to limit the cost of subsidies to the Rp95.9trn allocated in the budget. The government had proposed to end sales of subsidised fuel to owners of private cars in the capital, Jakarta, from January 1st. Sales in the rest of Java and on the neighbouring island of Bali were to have been cancelled from July 1st. However, in December the DPR called on the government to prepare a comprehensive impact assessment of the proposals, forcing a postponement of the ending of subsidies in Jakarta until the end of March. Still, oil prices may not remain at their current levels beyond the end of the northern-hemisphere winter, meaning that the government may still achieve its subsidy target.