WASHINGTON D.C., May 23, 2019 – The World Bank’s Board of Executive Directors today approved a US$1 billion loan in support of fiscal reforms, that will help the Government of Indonesia achieve its economic development and poverty reduction goals.
The loan, the third in the Indonesia Fiscal Reform Development Policy Loan series, focuses on fiscal reforms implemented in 2018 and 2019.
“Previous fiscal reforms undertaken by the government have already helped revenue performance, improved the quality of spending, and promoted the introduction of innovative financing. Building on these achievements, Indonesia is taking steps to further strengthen revenue performance and spending quality to ensure all Indonesians receive high quality services,” said Sri Mulyani Indrawati, Minister of Finance of the Republic of Indonesia.
The loan will also assist government reconstruction efforts following the natural disasters in the second half of 2018, which have inflicted large economic costs. Further, the loan recognizes Indonesia’s continued sound macroeconomic management in the context of global financial volatility in 2018.
This financing centers on reforms in three key areas of fiscal policy: (i) to improve spending quality through better spending composition, budget execution and efficiency of spending; (ii) to strengthen revenue administration by increasing tax administration efficiency, also compliance and audit capability, and reduce the cost of paying taxes; and (iii) to enhance tax policy by increasing revenue potential and the economic efficiency of tax policy.
“This important operation supports the Government’s continued efforts to reform its fiscal sector by collecting more and spending better, which in turn will allow the country to invest more in human capital and infrastructure,” said Rodrigo A. Chaves, World Bank Country Director for Indonesia and Timor-Leste. “Such investments will contribute to more sustainable growth and job creation, to further reduce inequality and poverty in Indonesia.”
World Bank’s support for fiscal reforms in Indonesia is a key component of the World Bank Group’s Country Partnership Framework, which focuses on government priorities that have transformational impacts.