World Bank2013-08-072013-08-072003-02-14https://hdl.handle.net/10986/14886Despite 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.en-USCC BY 3.0 IGOFISCAL POLICYFISCAL CONSOLIDATIONFISCAL CONSTRAINTSDEBT REDUCTIONFINANCIAL CRISESOIL REVENUESFISCAL SUSTAINABILITYSUBSIDY REDUCTIONREVENUE MOBILIZATIONBUDGET PROCESSBUDGET MANAGEMENTPUBLIC SPENDINGDECENTRALIZATIONMACROECONOMIC STABILIZATIONPUBLIC EXPENDITURESSECTORAL ADJUSTMENTREFORM POLICYRISK MANAGEMENTTAX ADMINISTRATIONTAX STRUCTURESFUEL TAXATIONINTEREST PAYMENTSLOCAL GOVERNMENTFINANCE LAW ACCOUNTABILITYADBADMINISTRATIVE EFFICIENCYALLOCATION OF RESOURCESANTI-CORRUPTIONASSETSAUDITINGAUTHORITYAUTHORIZATIONBALANCE SHEETBANK FOR INTERNATIONAL SETTLEMENTSBANK INDONESIABANK RESTRUCTURINGBANKING SYSTEMBONDSBORROWINGBUDGET EXECUTIONBUDGET FORMULATIONBUDGET LIABILITIESBUDGET MANAGEMENTBUDGET PROCESSBUDGET REFORMBUDGETARY RESOURCESCAPITAL ADEQUACYCENTRAL AGENCIESCENTRAL GOVERNMENTCIVIL SERVICECONSENSUSCONSOLIDATIONCONSUMER PRICE INDEXCONSUMPTION TAXESCOURT SYSTEMCPICROWDING OUTCURRENT EXPENDITURESDEBT FINANCINGDEBT SERVICEDECENTRALIZATIONDECENTRALIZATION FRAMEWORKDECENTRALIZATION SYSTEMDECREEDEMOCRATIZATIONDEVOLUTIONDISTRICTSECONOMIC CONDITIONSECONOMIC SHOCKSECONOMIES OF SCALEELECTRICITYEQUALIZATIONEXCHANGE RATEEXECUTIONEXPENDITURE RESPONSIBILITIESFINANCIAL ACCOUNTABILITYFINANCIAL CRISISFINANCIAL INSTITUTIONFINANCIAL MANAGEMENTFINANCIAL SECTORFINANCIAL VIABILITYFISCALFISCAL BALANCEFISCAL CONTROLFISCAL DEFICITFISCAL DISCIPLINEFISCAL MANAGEMENTFISCAL PERFORMANCEFISCAL POLICYFISCAL PRESSURESFISCAL REVENUEFISCAL SITUATIONFISCAL SURPLUSFISCAL SUSTAINABILITYFISCAL YEARFORECASTSFOREIGN DIRECT INVESTMENTFREE TRADEGDPGOVERNMENT DEBTGOVERNMENT INTERVENTIONGOVERNMENT REGULATIONGOVERNMENT REVENUESGROSS DOMESTIC PRODUCTINCOMEINFLATIONINTEREST RATEINTEREST RATESLABOR FORCELAWSLEGISLATIONLIQUIDITYLOCAL GOVERNMENTSMACROECONOMIC STABILIZATIONMATURITIESMINISTRY OF FINANCENATIONAL PLANNINGNATIONSOILOIL PRICESPOLICY DECISIONSPOVERTY ALLEVIATIONPRIVATE SECTORPRIVATE SECTOR PARTICIPATIONPRIVATIZATIONPRODUCTIVITYPROFIT RATEPROPERTY ASSESSMENTSPROVINCIAL GOVERNMENTSPUBLIC DEBTPUBLIC DEBT MANAGEMENTPUBLIC EXPENDITUREPUBLIC EXPENDITURE MANAGEMENTPUBLIC EXPENDITURE REVIEWPUBLIC HEALTHPUBLIC MANAGEMENTPUBLIC OFFERINGPUBLIC POLICYPUBLIC RESOURCESPUBLIC SECTORPUBLIC SERVICESREAL GDPREPRESENTATIVESRESOURCE ALLOCATIONREVENUE MOBILIZATIONREVENUE SHARINGRISK MANAGEMENTROADSSAVINGSSMALL BUSINESSSOCIAL SAFETYSOCIAL SAFETY NETSOCIAL SECTORSSOCIAL SERVICESSTATE BUDGETSTATE POWERSTATE-OWNED ENTERPRISESTAKEOVERTAXTAX ADMINISTRATIONTAX ARREARSTAX BURDENTAX COMPLIANCETAX POLICYTAX RATETAX RATESTAX REVENUETAX REVENUESTAX SYSTEMTRANSPARENCYTRANSPORTTREASURYUNDERVALUATIONVALUE ADDEDWorld Bank10.1596/14886