Indonesia Fiscal Reform DPL 2

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The Development Policy Loan (DPL) aims to support the Government of the Republic of Indonesia’s priorities for improving quality of spending, strengthening revenue administration and enhancing tax policy to further the country’s medium-term economic development and poverty reduction goals. The operation, in the amount of US$300 million, is the second in a programmatic series of now three single-tranche operations supporting critical policy and institutional reforms with three development objectives: a) improving composition of spending, budget execution rates and efficiency of spending; b) increasing tax administration efficiency and compliance and audit capability; and c) increasing revenue potential and economic efficiency of tax policy. A third single tranche operation is proposed, with the same development objectives. The third operation responds to a direct request from the government to support the acceleration of fiscal reform efforts in 2017. Government’s commitment to maintaining reform momentum before the election cycle beginning in 2019, is evidenced in recent appointments of a revenue reform team and special advisers to the Minister of Finance, as well as a significant increase in demand for technical assistance which the World Bank is responding to with development partners. This DPL series forms an integral part of the Indonesia Country Partnership Framework (CPF) collecting more and spending better engagement, which aims to support the Government’s fiscal reforms. The DPL series aims to address key policy and institutional bottlenecks in support of the Government’s fiscal reforms to improve the quality of spending, strengthen revenue administration and enhance tax policy.