World Bank supports Indonesia in improving efficiency of local govt spending

The World Bank and the Government of Indonesia have agreed to support the program through a US$ 400 million Program-for-Results loan over the period of 2024-2029.

The World Bank’s Board of Executive Directors on September 29, 2023, approved a program to support the Government of Indonesia in improving the equity, efficiency, and accountability of district spending financed by intergovernmental transfers.

“The World Bank appreciates the Government’s effort to embark on an ambitious reform of Indonesia’s intergovernmental finance system in view of strengthening the quality of subnational public spending.” said World Bank Country Director for Indonesia and Timor-Leste Satu Kahkonen. “We will continue to support the Government to strengthen service delivery and reduce inequities across districts in access to health, roads, and water, benefiting the most disadvantaged people, children, and women in Indonesia.”  

The program, SINERGIS (Strengthening Intergovernmental Transfers and Subnational Finance for Service Delivery in Indonesia), will support the government’s efforts to allocate the General Allocation Funds (DAU) more equitably and efficiently. It will strengthen the targeting and performance of the Capital Specific Allocation Fund (DAK Fisik), with the goal of closing district infrastructure gaps, which refers to the quality of infrastructure that needs to be improved in the health, road, and water sectors. This program is also aimed at strengthening monitoring and evaluation of district spending to improve its quality and harmonization with central government spending., as well as enhancing public financial management systems for better decision-making and greater accountability.

“It is important to strengthen the fiscal policy synergy between the central and sub-national governments to improve the quality of subnational expenditures,” said Sri Mulyani Indrawati, Minister of Finance of the Republic of Indonesia. “National fiscal policy synergy is crucial to creating better central and sub-national governments’ spending, through performance-based and asymmetric fiscal decentralization, toward the achievement of economic and social justice for the Indonesian people.”

The World Bank and the Government of Indonesia have agreed to support the program through a US$ 400 million Program-for-Results loan over the period of 2024-2029. The financing instrument will provide a platform for monitoring and tracking the results of SINERGIS and facilitate closer cooperation between all stakeholders. The program is aligned with the objectives of the World Bank’s Indonesia Country Partnership Framework 2021-2025 to increase the efficiency, equity and effectiveness of public spending. It will also contribute to the CPF’s objective of promoting inclusive and long-term economic growth.