The World Bank Report No: ISR13940 Implementation Status & Results Indonesia Program for Economic Resilience, Investment and Social Assistance in Indonesia (P130048) Public Disclosure Copy Project Name: Program for Economic Resilience, Investment and Social Program Stage: Implementation Seq.No: 3 Status: ARCHIVED Archive Date: 25-Jun-2014 Assistance in Indonesia (P130048) Country: Indonesia Approval FY: 2012 Product Line: IBRD/IDA Region: EAST ASIA AND PACIFIC Lending Instrument: Development Policy Lending Implementing Agency(ies): Key Dates Board Approval Date 15-May-2012 Original Closing Date 30-Jun-2014 Planned Mid Term Review Date 31-May-2013 Last Archived ISR Date 26-Jun-2013 Effectiveness Date 29-Jun-2012 Revised Closing Date 30-Jun-2014 Actual Mid Term Review Date Program Development Objectives Program Development Objective (from Program Document) The main objective of the proposed operation is to enhance the Government’s crisis preparedness to address the potential adverse impact of ongoing volatility in financial markets on Government’s ability to meet its gross fiscal financing needs from markets. Learning the lessons from the crisis of 1997/98 and more recently 2008/09, the Government would like to ensure that essential public expenditures are maintained and, if necessary, augmented to provide economic stimulus during this period of stress. Therefore, as part of its proactive response to the current global situation, the Government would like to put in place arrangements that would boost the confidence of international and domestic financial markets to enable the Government to raise necessary resources from them. Thesearrangements include a set of confidence-boosting policy measures as well as back-up financing arrangements—a part of which is the proposed loan—that would be available in the event that the worsening of global financial markets prevents Indonesia from accessing financing at reasonable rates. Has the Program Development Objective been changed since Board Approval of the Program? Yes No Overall Ratings Previous Rating Current Rating Progress towards achievement of PDO Moderately Satisfactory Moderately Satisfactory Public Disclosure Copy Overall Implementation Progress (IP) Moderately Satisfactory Satisfactory Implementation Status Overview The program is on track and progress towards the program objectives has been made in the following areas: (i) Maintaining financial system stability: Financial system stability has been maintained during a relatively turbulent period in financial markets and an ongoing slowdown in domestic deposit and credit growth. Despite the overall soundness of the system, risks remain (for example, from stress or a failure of a smaller-sized bank) and the authorities have been working to address several important gaps in the crisis framework. (ii) Sustaining critical public expenditures: The Government has continued to have access to financial markets at reasonable cost and met its issuance target in 2013 despite the tightening in financing conditions and rise in yields. Financing in 2014 has been on track to date although financing needs are set to rise with the likely increase in the fiscal deficit Page 1 of 6 The World Bank Report No: ISR13940 as revenue growth weakens and fuel subsidies continue to push up spending. Central government spending in 2013, excluding energy subsidies, interest payments and regional transfers, reached 89 percent of the revised Budget allocation. The disbursement rate on capital spending was similar, up from 82 percent in 2012, but its nominal growth rate fell. The draft revised 2014 Budget, currently under discussion with Parliament, includes proposed line ministry spending cuts which would trim the capital spending allocation by 17 percent relative to the original Budget. Public Disclosure Copy (iii) Improving the effectiveness of social protection programs to support the poor and vulnerable: The Government's progress in enhancing the effectiveness of social protection programs to support the poor and vulnerable, through improvements in the design and targeting of social assistance programs aimed at poor and vulnerable households, was demonstrated by the comprehensive compensation package for the June 2013 subsidized fuel price increase (including a temporary Unconditional Cash Transfer and further expansion of long-term social assistance programs ). The World Bank is providing support to these activities through its regular program, which ensures ongoing supervision of this operation. Follow up actions in the reform aims supported by PERISAI are being supported by technical assistance activities and through other DPL operations. Results Results Indicators Indicator Name Core Unit of Measure Baseline Current End Target OJK Preparation Team Text Value Date 31-Mar-2014 Comments See previous ISR - OJK exists and there is no more OJK transition team. Stability of the Financial System Yes/No Value Yes Yes Yes Date 16-Apr-2012 31-Mar-2014 30-Jun-2014 Comments Financial system remains Financial system remains Financial system remains stable stable. Loans increased by a stable. 21 percent and deposits by 12 percent from January to December 2013, althoughboth have shown a slightly decreasing trend over the past three years. The Public Disclosure Copy Loan to Deposit ratio (LDR) increased from 84 percent to90 percent over the same period and liquidity conditions tightened, esp. for smaller banks. But, key aggregate indicators (NPL, ROA, CAR etc) remain solid. Intervention by the Financial Sector Stability Yes/No Value No No Yes Coordination Forum Date 16-Apr-2012 31-Mar-2014 30-Jun-2014 Page 2 of 6 The World Bank Report No: ISR13940 Comments No need for FSSC Forum See previous ISR - there has FSSC Forum has intervened Intervention been no financial institution if needed failure requiring FSSC intervention. Public Disclosure Copy Functioning of the Financial Sector Stability Text Value FKSSK taking leading role in Improved common Coordination Forum coordination and decision understanding of the policy making and leading medium- options and measures that term work on on important can be used in the event of a policy issues. financial institution failure Date 31-Mar-2014 30-Jun-2014 Comments The FKSSK has taken a lead role in coordination and decision making, through leading regular quarterly and monthly meetings among members and deputies to assess current risks and the status of the financial sector. They have also played a lead role in facilitating communication and decision making during the financial market turbulence in mid-2013. The FKSSK is also leading medium term work among the members on important topics (such as determination of whether a financial institution is system, enhancing systemic risk analysis, etc). Government access to financial markets Percentage Value 26.00 99.00 100.00 Date 15-Mar-2012 31-Dec-2013 31-Dec-2012 Public Disclosure Copy Comments Gross securities issuance of IDR 323.4 trn reached 98.9% of the target in 2013, which had been revised up substantially from an initially approved IDR 280.4 trillion to IDR 331.8 trillion in the revised Budget (and then moved down marginally to Page 3 of 6 The World Bank Report No: ISR13940 IDR 326.9 trillionin November). Duration Budget Revision Process Days Value 30.00 1.00 Public Disclosure Copy Date 30-Mar-2012 31-Mar-2014 30-Jun-2014 Comments Budget revision processes No emergency Budget Note the target is for the time can take 30-60 days. revision process to date. As in for an emergency Budget 2012 and 2013, the 2014 revision process. Budget Law includes provision (in Article 35) for Parliament to approve an emergency budget revision in 24 hours. Capital Expenditures Disbursement Percentage Value 16.00 23.00 Date 30-Jun-2011 31-Mar-2013 29-Jun-2012 Comments Indicator is for percentage of full-year capital expenditures disbursed in H1. 18.5% of original Budget in H1 2013. Data for 2014 not yet available. Access to Household and Labor force survey Days Value 60.00 7.50 10.00 data Date 16-Apr-2012 31-Dec-2013 30-Jun-2014 Comments Similar comments to previous ISR. The time from request for data to receipt is between 5-10 days ( end-2013) Improved performance social assistance Text Value programs in a crisis Date Comments The design of the compensation package implemented as part of the Public Disclosure Copy proposed rise increase in the subsidized fuel prices increases showed improvements. In particular, the Government combined both short-term compensation measures with increases in long-term poverty reduction and social assistance investments (redirecting spending from fuel subsidy to Page 4 of 6 The World Bank Report No: ISR13940 targeted Social Assistance). Better targeting can also be seen in the scholarships Public Disclosure Copy component of the compensation program: BSM now uses the unified database to identify student beneficiaries, instead of through nomination by school committees as previously used. Overall, improvement in the targeting and adequacy assistance, as well as integrated delivery of benefits will further improve effectiveness of the SA programs in Indonesia. Better Targeting (exclusion error for the Percentage Value 48.00 35.00 poorest 30% of HH) Sub Type Supplemental Time to disburse in a crisis Months Value 5.00 2.50 3.00 Sub Type Supplemental Data on Financial Performance (as of 16-Aug-2012) Financial Agreement(s) Key Dates Project Ln/Cr/Tf Status Approval Date Signing Date Effectiveness Date Original Closing Date Revised Closing Date P130048 IBRD-81640 Effective 15-May-2012 31-May-2012 29-Jun-2012 30-Jun-2014 30-Jun-2014 Disbursements (in Millions) Public Disclosure Copy Project Ln/Cr/Tf Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed P130048 IBRD-81640 Effective USD 2,000.00 2,000.00 0.00 0.00 2,000.00 0.00 Tranches Tranche 1 Amount (USD) Expected Release Date Actual Release Date Status Page 5 of 6 The World Bank Report No: ISR13940 0 Pending Released Key Decisions Regarding Implementation Public Disclosure Copy No Key Decisions for Disclosure Restructuring History There has been no restructuring to date. Related Operations There are no related projects. Public Disclosure Copy Page 6 of 6