ISEAI: Indonesia’s B50 Program May Reduce Foreign Exchange Earnings

ISEAI: Indonesia’s B50 Program May Cut Annual Foreign Exchange Earnings

ISEAI – Indonesia’s Strategic and Economic Action Institution (ISEAI) warned that the country’s B50 initiative—requiring 50% biodiesel content in fuel—could diminish annual foreign exchange earnings by $2.7 billion. This projection stems from a potential 2 million-ton reduction in crude palm oil (CPO) exports during the second half of 2026, according to data from the Indonesian Palm Oil Entrepreneurs Association (GAPKI).

Paradox in Policy Impact

“This creates a paradox: the policy to conserve foreign exchange by reducing diesel imports may inadvertently weaken the nation’s top agricultural export sector,” stated ISEAI in a written statement dated July 10, 2026.

ISEAI emphasized that the B50 program’s rollout coincides with stable CPO supply growth, which has plateaued at approximately 48-51 million tons annually over the past five years. The institution linked this stagnation to the slow progress of the People’s Oil Palm Rejuvenation (PSR) initiative and declining plant productivity.

Domestic Demand and Export Constraints

Despite a 7.26% increase in CPO production in 2025 to 51.66 million tons, domestic reserves dropped by 19.79% to just 2.068 million tons, driven by high local consumption. As of April 2026, domestic demand for CPO totaled 2.141 million tons, with 1.137 million tons allocated to biodiesel, 831,000 tons for food, and 173,000 tons for oleochemicals.

“The shift in CPO allocation toward biodiesel is reducing Indonesia’s ability to meet international export demands,” said Rony P. Sasmita, a senior ISEAI analyst.

ISEAI argued that implementing the B50 program under these conditions could destabilize the governance of palm oil commodities. The institution highlighted that the policy’s timing—when production growth has slowed—might exacerbate export challenges and create economic imbalances.

Read more about B50’s role in supporting the rupiah and inflation through forex savings. Stay updated with the latest news from Tempo on Google News.