Indonesia: Fiscal and Public Expenditure Management Program (Subprogram 1)

Sovereign (Public) Project | 50168-001 Status: Closed

FPEMP supports the government's commitment to reduce household income inequality, and represents a medium- to long-term partnership between the Asian Development Bank (ADB) and the government. The government's priority areas to reduce income inequality include (i) aligning medium-term expenditure and programs with its national medium-term development plan (RPJMN) and Sustainable Development Goals (SDGs) targets, (ii) enhancing the national public expenditure systems to improve quality of spending, and (iii) improving fiscal transfers and subnational governments' spending to promote better public service delivery.

Project Details

Project Officer
Mohd Ismail, Mohd Sani Southeast Asia Department Request for information
Country
  • Indonesia
Sector
  • Finance
 
Project Name Fiscal and Public Expenditure Management Program (Subprogram 1)
Project Number 50168-001
Country Indonesia
Project Status Closed
Project Type / Modality of Assistance Loan
Source of Funding / Amount
Loan 3454-INO: Fiscal and Public Expenditure Management Program (Subprogram 1)
Ordinary capital resources US$ 500.00 million
Loan: Fiscal and Public Expenditure Management Program (Subprogram 1)
KfW Bankengruppe US$ 224.00 million
Strategic Agendas Inclusive economic growth
Drivers of Change Governance and capacity development
Partnerships
Sector / Subsector

Public sector management - Public expenditure and fiscal management

Gender Equity and Mainstreaming No gender elements
Description FPEMP supports the government's commitment to reduce household income inequality, and represents a medium- to long-term partnership between the Asian Development Bank (ADB) and the government. The government's priority areas to reduce income inequality include (i) aligning medium-term expenditure and programs with its national medium-term development plan (RPJMN) and Sustainable Development Goals (SDGs) targets, (ii) enhancing the national public expenditure systems to improve quality of spending, and (iii) improving fiscal transfers and subnational governments' spending to promote better public service delivery.
Project Rationale and Linkage to Country/Regional Strategy Indonesia is facing the twin problems of a prolonged economic slowdown and rapidly rising household income inequality. Economic growth has steadily declined from 6.4% in 2010 to 4.8% in 2015, and is expected to remain only slightly above 5.0% in 2016 and 2017. Growth slowed initially because of falling commodity prices, which then fed back into lower growth in the non-resource sector, while new sources of growth have yet to emerge. The economic slowdown, combined with persistent volatility in the global financial and commodity markets, also translated into lower fiscal revenue collection, which in turn challenges the government's efforts to stimulate the economy. Revenue collection fell by 9.8% from January to April 2016, compared with the same period in 2015, and the government expects a shortfall of $16.7 billion in 2016. Given the constitutional limit on the budget deficit at 3.0% of gross domestic product (GDP), falling budget revenues impose constraints on the government's spending in the social sector and for infrastructure, even though these are necessary to overcome the income inequality problem. ADB analysis shows that expenditure on education and health is most sensitive to declines in revenue and to overall deficit levels, despite the government being legally required to allocate 20% of the budget to education and 5% to health.
Impact Reducing household income inequality (National Medium-Term Development Plan, 2015 2019)
Project Outcome
Description of Outcome Better targeted social sector and public infrastructure spending
Progress Toward Outcome
Implementation Progress
Description of Project Outputs

1. Medium term spending aligned with RPJMN and SDGs

2. Improved national public expenditure quality

3. Strengthened public expenditure management system at local government level

Status of Implementation Progress (Outputs, Activities, and Issues)
Geographical Location
Safeguard Categories
Environment C
Involuntary Resettlement C
Indigenous Peoples C
Summary of Environmental and Social Aspects
Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design
During Project Implementation
Responsible ADB Officer Mohd Ismail, Mohd Sani
Responsible ADB Department Southeast Asia Department
Responsible ADB Division Public Management, Financial Sector and Trade Division, SERD
Executing Agencies
Fiscal Policy Office-Ministry of Finance
[email protected]
Fiscal Policy Office-Ministry of Finance
Gedung RM Notohamiprojo, 8th floor
Jl. DR. Wahidin No. 1
Jakarta, Indonesia
Timetable
Concept Clearance 02 Aug 2016
Fact Finding 14 Apr 2016 to 22 Apr 2016
MRM 31 Aug 2016
Approval 10 Nov 2016
Last Review Mission -
Last PDS Update 14 Nov 2016

Loan 3454-INO

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
10 Nov 2016 17 Nov 2016 06 Dec 2016 30 Jun 2017 - 03 Mar 2017
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 724.00 Cumulative Contract Awards
ADB 500.00 10 Nov 2016 500.00 0.00 100%
Counterpart 0.00 Cumulative Disbursements
Cofinancing 224.00 10 Nov 2016 500.00 0.00 100%

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Related Publications

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