The “Indonesia Public Expenditure Review: Spending for Better Results” provides a comprehensive analysis of the quality and effectiveness of public spending in Indonesia. It identifies key constraints and provides actionable recommendations to improve fiscal sustainability, efficiency, and effectiveness, with the goal of addressing Indonesia’s development challenges.
Key Insights:
- Fiscal Challenges:
- Indonesia’s spending is low relative to its development needs, with general government spending at 16.6% of GDP, well below emerging market averages.
- The tax-to-GDP ratio remains low at 9.8% (2019), limiting fiscal space for priority areas like health, education, and infrastructure.
- Efficiency and Effectiveness of Spending:
- There are systemic inefficiencies across sectors, including a focus on curative over preventive health interventions and limited prioritization of early childhood education.
- Coordination challenges between central and subnational governments hinder the delivery of key services.
- Progressive Reforms:
- Energy subsidy reforms have improved budget allocation towards social assistance and infrastructure.
- Programs like the Family Hope Program (PKH) are more targeted and effective compared to traditional subsidy schemes.
- Sectoral Performance:
- Human Capital: Spending on health and education has increased but remains inadequate compared to peers.
- Infrastructure: Spending focuses more on new construction than maintenance, limiting long-term sustainability.
Note on Preparation
This report was developed by a World Bank team led by Cut Dian Agustina, Ahya Ihsan, and Ralph van Doorn, with contributions from a multidisciplinary team of experts across key sectors, including Pui Shen Yoong, Arun Arya, and others. The team collaborated closely with Indonesian ministries and benefitted from the support of international donors, including the European Union, Canada, and Australia.