We expect the fiscal deficit to widen to the equivalent of 1.4% of GDP in 2011, from an estimated 0.8% in 2010. This compares with the target of 1.8% of GDP in the 2011 budget. Although the finance minister, Agus Martowardojo, has continued with the carrot-and-stick system introduced by Ms Mulyani of increasing the budgets of government ministries that meet their spending targets and reducing allocations to those that miss them, underspending will remain a problem. A recent rise in global oil prices poses the main risk to our forecast. Despite the fact that fuel subsidies mainly benefit Indonesia's middle class, the governments has baulked at proposals to free the prices of petrol, diesel and other fuel products to rise and fall in line with market trends. With the international price of oil (dated Brent Blend) trading at around US$115/barrel at present, well above the 2011 budget assumption of US$80/b, spending on subsidies this year could easily exceed the expected Rp187.6trn (US$21.6bn). In 2012-15 the fiscal deficit will shrink. As a result, government debt is forecast to drop further in relation to GDP, and this could mean that Indonesia's sovereign debt rating improves to investment grade, making it cheaper for the government to raise funds in international markets.