Welfare Populism's Dilemma: Free Meal Program vs. Energy Subsidies Amidst Oil Price Shocks

Yuliani Widianingsih

Universitas Pembangunan Nasional Veteran Jakarta

The Free Nutritious Meal (Makan Bergizi Gratis/MBG) program was engineered as a crucial instrument of welfare populism, designed to consolidate the political legitimacy of Indonesia's post-election administration. However, its implementation has collided with an exogenous crisis beyond the state's control: an extreme surge in global crude oil prices in the second quarter of 2026. This article examines the government's dilemma, trapped between two populist policies directly affecting the grassroots economy: maintaining blanket fuel subsidies or fulfilling the multibillion-dollar MBG campaign promise. Utilizing the political economy framework of fiscal space and fiscal squeeze, this study finds that the state faces an asymmetrical tradeoff. Reallocating energy subsidies to fund the MBG would trigger imported inflation, destroying the purchasing power of the working class and the poor. Conversely, delaying the MBG to secure energy prices erodes the regime's political capital. The analysis concludes that constrained fiscal capacity ultimately forces the government to rationalize its populist promises, demonstrating that without energy independence and elastic fiscal space, welfare populism in emerging markets remains profoundly vulnerable to global and geopolitical volatility

Article link: https://www.asianinstituteofresearch.org/lhqrarchives/welfare-populism's-dilemma%3A-free-meal-program-vs.-energy-subsidies-amidst-oil-price-shocks