“Without a major reform in revenue collection, along with the continued moderation of commodity prices, Indonesia’s revenue to GDP ratio may remain at a lower level. This would severely constrain the fiscal space for spending on development priorities,” said Hans Anand Beck, World Bank Lead Economist and team leader for the operation.
The Second Indonesia Fiscal Reform Development Policy Loan supports the government’s reforms to improve revenue collection by broadening the tax base and increasing the compliance rate for individual and corporate taxpayers. More medium term budgeting and earlier procurement as well as monitoring of subnational spending will support efficient and effectiveness of public spending, including for health, capital expenditure for infrastructure, and social assistance.
This financing is the second of three loans to support Indonesia’s fiscal reforms. The first loan supported reforms that included larger allocations for healthcare and social assistance programs, and reducing VAT exemptions for some consumption goods, which helped some lower-income families escape poverty.
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