Items in this collection
Now showing 1 - 3 of 3
Publication(Washington, DC, 2003-02-14) World BankDespite the substantial progress in managing its fiscal challenges post-1997 financial crisis, Indonesia's risks to the budget have not disappeared, though the Government continues to be committed to fiscal consolidation. While debt sustainability is improving, the budget remains vulnerable to shocks, and, large non-discretionary spending (interest payments, transfers to the regions, personnel spending) still constrain the use of fiscal policy for macroeconomic stabilization, and social risk protection, and, as the fiscal situation improves, and decentralization proceeds, a rethinking of resource allocation becomes necessary. This report assesses Indonesia's progress in dealing with challenges that have altered the fiscal system since the crisis, and reviews options for fiscal consolidation, as well as sectoral issues in the new decentralized environment, including public expenditure management reforms. Suggestions include an increased revenue mobilization to make the budget more risk proof, and an improved tax administration, rather than streamlining the tax structure alone, while the Government's decision to eliminate the fuel subsidy remains critical for fiscal consolidation (which has little social implications). Moreover, the large interest payments burden incurred during the crisis, is crowding out development spending, and similarly, increased transfers to local governments are limiting discretionary spending (which could be accompanied by a decrease in central development spending in areas of regional responsibilities). A refinement of the budget management system is necessary, where the Finance Law would be instrumental in establishing accountability between the Executive, and Parliament.
Publication(Washington, DC, 2001-11) World BankIn the one hundred days since assuming office, the new administration of Megawati Soekarnoputri has made little progress on structural and governance reforms. The events of September 11 and the slowdown in the global economy worsened the investment climate in Indonesia, adding to the government's already formidable array of challenges. Indonesia's recovery has lagged behind its neighbors and over half its population vulnerable to poverty, more than any other crisis country. Moreover, its fragile banking and corporate sectors, and the precarious state of its government finances, make the country highly vulnerable to risks--with immediate implications for fiscal sustainability. Donors need to be realistic about what is feasible, given strong vested interests, severe institutional weaknesses, the uncertainties arising from decentralization, and a turbulent transition to democracy. Progress is most needed in the key areas of structural reforms, good governance, and empowering and investing in the poor. Together with fiscal sustainability, they are consistent with the premise that stability, growth, and effective government are the key ingredients for long-lasting and sustainable poverty reduction.
Indonesia - Accelerating Recovery in Uncertain Times : Brief for the Consultative Group in Indonesia(Washington, DC, 2000-10-13) World BankThe study reviews Indonesia's recovery so far, which in spite of only modest growth, is taking hold, and its base has expanded beyond consumption. With inflation under control, real wages are rising again, and poverty declined from a peak of over twenty three percent. The rapid export growth, and high oil prices were factors to offset capital outflows, thus, Indonesia's cushion of international reserves increased, lowering the deficit, and limiting financing needs, which resulted in bank, and corporate emergence. But financial markets were doubtful of the real economic developments, aggravated by political turmoil, and the developments in East Timor, which created market uncertainty. However, the study reflects optimism on the country's agenda, encouraged by the Government's program to accelerate recovery, with broad domestic and international support. The study examines policy options for fiscal sustainability, and the role of donors, and, assesses poverty within a constructive strategy for the future, exploring as well governance improvement through legal and judiciary reforms, suggesting the rule of law is still far from being assured. The study recommends changes within the political process, and to its legal system and civil service, as well as changes from the role of the military, to the way Government handles its finances.