First Development Policy Loan

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The proposed First Development Policy Loan (DPL) for Indonesia has been designed to recognize past actions and support continued progress in Indonesia's policy reforms during the transition between administrations and from stabilization to development. The loan supports the Government's public policy statements and agenda in key economic areas with a specific focus on maintaining macroeconomic stability, enhancing the investment climate, and improving public financial management and anti-corruption. In addition, it provides vital financing at a critical stage and provides an effective vehicle for the Bank to engage the new administration. The expected results of this approach include sustained macro stability, an improved investment climate, greater government accountability, and improved public services for the poor. The proposed DPL supports the policy reforms in the following areas: Macroeconomic stability and creditworthiness: The administration has indicated its commitment to build on the fiscal discipline achieved, and a willingness to address problematic issues in subsidies, tax compliance, and inter-governmental fiscal transfers. Investment climate: The administration has expressed its commitment to continued tax and customs reforms, given the problems in these areas. Public financial management and anti-corruption: The administration is committed to continuing fiduciary and budget reforms through, and among other actions, issuing implementing regulations for several laws, establishing a Treasury Single Account, and strengthening the Inspector General's office. By 2007, these reforms are expected to result in significant improvements to budgeting and transparency, and accountability in public financial management.