ADB $500 Million Loan to Improve Public Expenditure Management, Reduce Inequality in Indonesia

News Release | 10 November 2016

MANILA, PHILIPPINES (10 November 2016) — The Asian Development Bank (ADB) has approved a $500 million loan to help Indonesia manage and improve its fiscal and public expenditure management in support of ongoing efforts to reduce poverty and income inequality. 

“Improving public expenditure management is a key element of the Indonesian government’s drive to reduce poverty, with one in every ten people still living below the poverty line,” said Sona Shrestha, Deputy Country Director of ADB’s Indonesia Resident Mission. “This program will support better targeting of social protection programs and safeguard expenditure in education, health and infrastructure.”

Insufficient public spending and investment on health, education, and infrastructure have contributed to the widening of Indonesia’s income inequality over the past 15 years. This is due largely to weaknesses in the country’s public expenditure management system that have resulted in low quality public service delivery. 

The first subprogram of the Fiscal and Public Expenditure Management Program (FPEMP) will align the country’s medium-term spending with its national development plan as well as with targets under the Sustainable Development Goals. It will also support increased spending on health, infrastructure, and education, while also expanding coverage of national health insurance to include an additional 4 million beneficiaries among the poorest 40%.

FPEMP will also improve disbursement, reporting, and evaluation of public spending to ensure transparency and accountability for more efficient public services. The program continues ADB’s longstanding commitment to improve Indonesia’s public expenditure management, social protection, and fiscal and governance framework. 

ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, ADB in December 2016 will mark 50 years of development partnership in the region. It is owned by 67 members—48 from the region. In 2015, ADB assistance totaled $27.2 billion, including cofinancing of $10.7 billion.