Continued Reforms Result in Stronger Management of Public Finances in Indonesia

Stocks and Financial Services Press Releases Wednesday May 16, 2018 09:33
Jakarta--16 May--World Bank

Jakarta, May 15, 2018 – Consistent reforms in Indonesia's public financial management have led to a stronger fiscal framework and system for budget execution, says the latest Public Expenditure and Financial Accountability assessment (PEFA) report for Indonesia, launched by the Minister of Finance today. The launch provides a platform for a public dialogue on the state of public financial management in Indonesia and the government's direction for future reform efforts.

Indonesia has made significant gains in the preparation, reporting, and execution of the national budget, with higher scores for transparency of public finances, policy-based fiscal strategy and budgeting, better control in budget execution, and accounting and reporting, according to the report, which was prepared by the government of Indonesia with support from the World Bank and international development partners.

"We continue to carry out critical reforms in public financial management, and these reforms are leading to results. A significant result is reflected in the achievement of an unqualified audit opinion from BPK in 2016. We are confident that further reforms will lead to a better value for money through stronger public finances and improved service delivery," said Minister Sri Mulyani Indrawatifrom the Ministry of Finance.

Amongst the mechanisms which have led to stronger public finance in Indonesia are instruments now in place that enable more prudent fiscal management and control of budget execution. Fiscal rules, including restrictions on the budget deficit and outstanding debt, are effectively adhered to.

"Collecting more and spending better is integral to Indonesia's efforts to enhance its public services and deliver more inclusive and sustainable development," said Rodrigo A. Chaves, World Bank Country Director for Indonesia and Timor-Leste. "The World Bank looks forward to supporting further reforms in public financial management."

The PEFA assessment covers institutions receiving budget allocations from the central government budget, including line ministries and agencies, public corporations, as well as local governments (through the central government transfers). This PEFA report covers the fiscal years from 2014 until 2016.

"This PEFA assessment provides important insights on Indonesia's reforms in public financial management, and enables us to identify gaps and opportunities for further progress. Canada is delighted to see how the reforms undertaken to date by the government of Indonesia are developing a solid platform for improved quality of financial reporting and oversight, which will enhance transparency and accountability," said Peter MacArthur, Ambassador of Canada to Indonesia.

PEFA is an international methodology for assessing public financial management performance. It provides a framework for assessing and reporting on the strengths and weaknesses of public financial management, using quantitative indicators to measure performance.

"We congratulate Indonesia for undertaking the PEFA 2017. The report demonstrates Indonesia's willingness to further improve the management of its public finances as shown with the alignment of PFM instruments and system with international standards. The EU will continue to support the public financial reform agenda of the Government," said Vincent Guerend, Ambassador of the European Union to Indonesia and Brunei Darussalam.

Indonesia's reforms in public financial management are multi-faceted and includes also improvements in the flow of information. In 2015, Indonesia rolled out a system for managing financial management information that ensures more efficiency and accountability of the government's financial transactions.

"Switzerland welcomes the successful execution of the PEFA. This report provides an important framework for prioritizing the next wave of reforms and we look forward to the follow-up reform actions by the government of Indonesia," saidYvonne Baumann, Ambassador of Switzerland to Indonesia.


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