ADB lends Indonesia $1bn to improve budgeting

8 Jun 18

The Asian Development Bank is lending Indonesia $1bn to strengthen reforms to public financial management and bring it in line with the Sustainable Development Goals.

The move comes after the World Bank said last month that Indonesia should continue to strengthen its public financial management in the face of slower growth and rising inequality.

A first loan of $500m will support government reforms to how it manages public spending in an effort to improve budget preparation, transparency and monitoring.

The loan will also Indonesia to reduce poverty and inequality in line with the United Nations SDGs, the ADB said. 

Sani Ismail, senior financial sector specialist for ADB’s Southeast Asia department, said: “The programme has enabled the government to increase targeted spending and improve the quality of spending in priority areas such as health and education in line with its implementation of the UN’s SDGs.

“Strengthening public expenditure management, particularly at the sub-national level, will improve the delivery of services.”

The bank has been supporting the country’s reforms to public budgeting since 2001, and Indonesia’s efforts to improve transparency have been recognised globally, with it ranking second in Southeast Asia in the 2017 Open Budget Index.

A second $500m loan will the government boost investment-led growth by making the country’s regulatory environment more business friendly.

Robert Boothe, public management specialist for ADB’s Southeast Asia department, said: “The programme will the government boost efficient public and private investment, while also addressing investment constraints at the subnational level.

“The reforms include consolidating and expediting business licensing processes, institutionalising good regulatory practices, and introducing various tools and systems to the government implement its public investment program.”

The ADB and Indonesian government have long been promoting infrastructure development as well as seeking both public and private investment to boost development.

In 2016, the ADB approved a loan to support public private partnerships and make public procurement more efficient and transparent.

The latest loans will be complemented with the equivalent of $239m in parallel financing from the German development cooperation through KfW.

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