ADB's $500 Million Loan to Improve Public Expenditure Management in Indonesia

News Release | 25 October 2019

JAKARTA, INDONESIA (25 October 2019) — The Asian Development Bank (ADB) has approved a $500 million policy-based loan to support Indonesia’s fiscal and public expenditure management reforms and improve the quality of government spending on health, education, social protection, and infrastructure.

The loan will finance the third subprogram of the Fiscal and Public Expenditure Management Program (FPEMP), a key pillar of ADB’s support to the Government of Indonesia’s efforts to significantly reduce poverty and income inequality in the country and meet Indonesia Sustainable Development Goals’ (SDGs) commitment.

“The Fiscal and Public Expenditure Management Program has been instrumental in making sure that the government’s efforts to increase quality of spending in important sectors such as health, education, and social protection are sustained, in line with its targets under the SDGs,” said ADB Senior Financial Sector Specialist for Southeast Asia Mr. Sani Ismail. “The third subprogram also include demand-driven labor market activation programs in Bandung Barat and Makassar to address youth unemployment.”

ADB has been supporting public financial management and expenditure reforms in Indonesia since 2001. The reform program was first approved by ADB in September 2016. The program’s first two subprograms funded efforts to map out the government’s medium-term expenditure linked to targets of the national Medium-Term Development Plan and the SDGs. It also helped improve national and local public expenditure management by synchronizing national and local budget planning.

The third subprogram supports efforts implementing SDG-related public spending reforms, including climate adaptation, social assistance, and labor market activation programs. It also supports reforms in fiscal transfers to subnational governments including making them more performance-based to increase accountability and strengthen service delivery at the local level.

A post-program partnership framework for 2020–2025 is included in FPEMP to allow ADB to continue assisting current reforms and support the Government of Indonesia’s effort to boost human capital development.

ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. In 2018, it made commitments of new loans and grants amounting to $21.6 billion. Established in 1966, it is owned by 68 members—49 from the region.