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Fiscal Risk Statement: An Effort of Indonesia to Improve Stakeholders’ Awareness, Fiscal Transparency, Fiscal Accountability and Fiscal Sustainability

APBN sebagai instrumen utama dalam kebijakan fiskal dihadapkan pada beberapa tantangan dalam mewujudkan kondisi fiskal yang berkualitas, sehat dan berkelanjutan untuk mendukung sasaran pembangunan nasional. Adapun tantangan utama yang perlu diantisipasi adalah ketidakpastian ekonomi global, volatilitas harga komoditas serta keterbatasan ruang fiskal dalam APBN. Tantangan utama tersebut tentu berpengaruh terhadap pengelolaan fiskal pemerintah Indonesia, baik dari sisi pendapatan negara, belanja negara maupun pembiayaan anggaran.

Untuk mewujudkan kondisi fiskal yang transparan, akuntabel dan berkelanjutan tersebut, sejak tahun 2008 pemerintah Indonesia melalui Kementerian Keuangan selaku penyusun dan pengelola fiskal di Indonesia, telah melakukan pengungkapan pernyataan fiskal dalam setiap penyusunan Nota Keuangan dan APBN. Harapannya, upaya ini dapat membantu pemerintah Indonesia dalam menyediakan kerangka kerja untuk mengidentifikasi dan memitigasi risiko yang dapat memberikan tekanan terhadap APBN sebagai instrumen utama dalam kebijakan fiskal.

Untuk itu, program pembelajaran ini di-desain untuk mendiseminasi reformasi kebijakan publik yang dilakukan Indonesia melalui pengungkapan risiko fiskal dalam Nota Keuangan dan APBN dalam rangka meningkatkan kesadaran seluruh pemangku kepentingan (stakeholder) dalam pengelolaan kebijakan fiskal, keterbukaan (transparency) fiskal, dan tanggung jawab (accountability) fiskal serta mencapai kesinambungan fiskal (fiscal sustainability). Desain pembelajaran dibuat sedemikian rupa sehingga peserta juga dapat mendiskusikan kebijakan terkait risiko fiskal di Indonesia dengan para policy maker.

6 STUDENTS ENROLLED

FISCAL RISK STATEMENT: An Effort of Indonesia to Improve Stakeholders’ Awareness, Fiscal Transparency, Fiscal Accountability and Fiscal Sustainability

BACKGROUND

 

“In 2008, Indonesia starts to include the disclosure of fiscal risk statement, which consists of analysis on significant financial risks that could distress the central government budget, as a part of their annual budget documents. This provision made Indonesia one of the pioneers in fiscal risk analysis among emerging market economies”

(IMF, November 2010).

 

Indonesia’s concern on Fiscal Risks grows as the country’s economy fell due to unmitigated exchange rate volatility that caused hyperinflation in 1997. As an attempt to mitigate the impact of unseen threat in the future, the government established the fiscal risk assessment center as part of Fiscal Policy Agency in 2007. This move made Indonesia became one of the first emerging countries that took fiscal risk mitigation action seriously. Since then, the fiscal risk assessment center prepare a statement of fiscal risk disclosure as an integral part of the state finance note in each year. This disclosure of fiscal risk statement has received appreciation from various institutions in the country and abroad, such as the IMF, as stated in the Report on the Observance of Standards and Codes (ROSC) – Fiscal Transparency Module – in 2010.

In recent years, fiscal risks have been growing substantially due to the increasing volumes and volatility of international private capital flows and the privatization of state functions as this is often accompanied by implicit or explicit state guarantees. Given the importance, General Finance Education and Training Center (General Finance ETC) will provide workshop series which will take Indonesian case in mitigating the fiscal risk by disclosing fiscal risk statement in the State Budget documents.

General Finance Education and Training Center (General Finance ETC) was established under Finance Education and Training Agency (FETA). In this regards, FETA is one unit of Ministry of Finance, Republic of Indonesia (MoF-RI) which has an important role as “the Center of Excellence” in the area of public finance within Indonesia. FETA has 6 ETCs with General Finance’s ETC is one of them.

The primary responsibility of General Finance ETC is to strengthen and implement institutional capacity building in the areas of Public Finance to all government officials within Indonesia, especially MoF-RI officials. Also, as part of social responsibility regarding educating the public, General Finance ETC also responsible for educating and sharing knowledge in the area of public finance to all MoF-RI stakeholders, both in Indonesia and around the world.

General Finance Education and Training Center (General Finance ETC) realizes the valuable role of GDLN to disseminate and share knowledge to the worldwide. As part of GDLN Indonesia (especially under FETA DLC), General Finance ETC will launch workshop series which will focus on Indonesia’s experience in disclosing the fiscal risk statement as an effort to improve stakeholders’ awareness, fiscal transparency, fiscal accountability and fiscal sustainability.

The form of the program will include face-to-face learning (for participants who are located in Jakarta-Indonesia) and video conferencing workshop (for participants who are located outside Jakarta-Indonesia). The speakers of the program are the practitioners from the Ministry of Finance who were involved in policymaking related to fiscal risk statement.

 

 

COURSE DESCRIPTION

The implementation of the State Budget usually encounters various challenges that can cause fiscal pressure. These challenges, which commonly known as fiscal risks, are primarily derived from global economic conditions which affect the domestic economy through changes in the underlying macroeconomic assumptions of the state budget.

Unanticipated fiscal risks will burden the state budget and affect economic growth targets in different coverage and depth, depending on the country’s economic maturity. Fiscal risks that occur in developed countries will potentially hamper economic growth. Whereas in developing countries, the implications will be more severe. The fiscal risks that spread rapidly throughout the economy will cause capital outflow and may change the direction of economic growth.

Furthermore, in a developing country with weak economic institutions, the expectation of fiscal risks will affect the behavior of economic agents and thus potentially hamper economic growth even before such fiscal risks occured. The economic crisis that occurred in Indonesia in mid-1997 is an excellent example to show the impact of unanticipated fiscal risks to the fiscal stability.

In accordance with the principles of state finance management, the Government through the Ministry of Finance annually disclose the Fiscal Risks Statement as an integral part of the Finance Note and State Budget. Therefore, the purpose of this program is to disseminate how Indonesia makes a reform in public policy by disclosing fiscal risk statement in State Budget in order to improve stakeholders’ awareness, fiscal transparency, fiscal accountability and fiscal sustainability. We expect that this program could be complemented with a disscussion from the member of GDLN East Asia and the Pacific regarding the topic.

 

COURSE SCHEDULE (Jakarta Time)

No Topic Date & Time
1 Workshop Series #1 1 November 2018:

1st Session:

Definition of Fiscal Risk, Background and Urgency of Disclosing Fiscal Risk Statement, and Sources of Fiscal Risk

 

2nd Session:

Discussion

 

Nov 1

 

13.15 – 14.45

 

 

 

14.45 – 15.30

2 Workshop Series #2  8 November 2018:

1st Session:

Fiscal Risk Mitigation

 

2nd Session:

Discussion

Nov 8

 

 

13.15 – 14.45

 

14.45 – 15.30

 

COURSE ATTENDANCE AND REQUIREMENTS

 

The course will be delivered in two half-day workshops with three training hours per day.  The delivery method is divided into lecture, presentation, and discussion.  The learning process consists of face-to-face learning intended for participants who are located in Jakarta, Indonesia and video conference workshop for participants who are located outside Jakarta, Indonesia. The speakers will be practitioners from the Ministry of Finance, Central Bank of Indonesia, or others who were involved in public policymaking.

The program is designed to generate benefit for those who are actively engaged or interested in economics and/or finance. It is also beneficial for practitioners or academics who do research related to fiscal risks management. Therefore, the intended participants are senior government officials whose work relate to the issue, students, lecturers and other representatives from academia and civil society, practitioners from the private sector; and representatives from financial and development agencies.

Since we are government institutions, we will provide the program free of charge. We will also welcome each participating site to participate in the discussion regarding the topic. Please kindly be noted that we will not provide any rewards in recognition of the administrative costs and efforts that each participating site might incur.

Participants will be encouraged to take part in debates and share professional experiences and case studies. Each participating site needs to collect application forms (as attached) and participants’ CV and submit it to General Finance ETC before October 26th, 2018. Only those who attend all sessions of the workshop who can get the certificate of completion.

 

COURSE OUTLINE

  1. Definition of Fiscal Risk, Background and Urgency of Disclosing Fiscal Risk Statement, and Sources of Fiscal Risk

The disclosure of fiscal risks statement has been an integral part of Indonesia’s financial note and state budget since 2008. In this section, the lecture aims to describe the definition of fiscal risk, the background and urgency of disclosing those fiscal risk statement, and the sources of fiscal risks in Indonesia.

Fiscal risks are defined as all future events that might cause a fiscal pressure on the state budget. Previously, fiscal risks are described as a potential increase in the state budget’s deficits which is caused by unanticipated occurrences. The amendment of this definition is based on the condition that the risks encountered by the state budget are not only in the form of an additional deficit related to revenues and/or expenditures but also in the kind of pressure on the financing side.

The fiscal risk mainly comes from various government activities related to the fiscal policy that influence the national economy through aggregate revenue and expenditure. The 2018 state budget categorized the source of fiscal risks into five categories, namely: the risk of basic macroeconomic assumptions; the risk of state revenues; the expenditure risk; the risk of budget financing; and the specific fiscal risks.

Therefore, this session will consist of discussion on how Indonesian define the fiscal risk and how urgent to disclose fiscal risk statement. This session also will elaborate the sources of fiscal risk in Indonesia. Through this session, it is expected that participants could take some lessons to learn from Indonesia in defining, identifying and categorizing fiscal risks.

 

Reference :

Republik Indonesia. 2018. “Nota Keuangan beserta Anggaran Pendapatan dan Belanja Negara”

 

 

 

  1. Fiscal Risk Mitigation

Indonesia’s fiscal risk management grows in line with the development of government policies and the changes in economic conditions which are affected by the basic macroeconomic assumptions.  In the framework of prudent fiscal management, risk mitigation measures are needed for anticipating the impact of an unexpected change in economic conditions on the state budget. Based on the state finance note in 2008, the Indonesian government has formulated several types of risk mitigation measures.

The first measure is the risk mitigation comes from basic macroeconomic assumptions which is designed to minimize the impact of the shift in basic macroeconomic assumptions, including the reduction of the fiscal sensitivity of state budget deficits and the fiscal sensitivity of the state-owned enterprises. The second measure is the risk mitigation related to state revenues. It consists of macro-risks-reduction by improving domestic economic conditions to increase the ability of tax payers and micro-risks mitigation to promote the integrity and professionalism of tax collectors and other state levies that will ultimately affect public revenues in general.

In addition, the government also mitigates the expenditure risks by transferring less productive programs to more productive programs, such as: reducing the allocation of state budget of consumptive activities, such as: official travel and consignment. Related to the risk of budget financing, the government mitigates the government debt risks and the contingency risks. Finally, government also mitigates the specific fiscal risks mitigation, including: natural disasters management, stabilization of food prices, lawsuits to the government, housing finance programs in low-income communities, as well as the development of new renewable energy.

The purpose of this session is to provide more information about how Indonesia mitigates the fiscal risks. This session will elaborate the effort of Indonesia to mitigates five categories of fiscal risk.

Reference :
Republik Indonesia. 2018. “Nota Keuangan beserta Anggaran Pendapatan dan Belanja Negara”

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