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OVERVIEW: FISCAL SPACE IN

INDONESIA, MYANMAR, AND TIMOR-LESTE


Arthur van de Meerendonk,

Disclaimer: The views expressed in this document are the views of the author(s) and do not necessarily reflect the views or policies
of the Asian Development Bank (ADB), or its Board of Directors or the governments they represent. ADB does not guarantee
the source, originality, accuracy, completeness or reliability of any statement, information, data, finding, interpretation, advice,
opinion, or view presented, nor does it make any representation concerning the same.

ADB–ADBI Regional Inception Workshop: Strategies for Financing Social Protection to Achieve SDGs in DMCs
17-18 May 2018, ADBI Tokyo, Japan
CONTENT
• Background: What is Fiscal Space?
• Methodology/ Approach
• Preliminary(!) Results
• Preliminary(!) Conclusions

ADB–ADBI Regional Inception Workshop: Strategies for Financing Social Protection to Achieve SDGs in DMCs
17-18 May 2018, ADBI Tokyo, Japan
BACKGROUND: What is Fiscal Space?
What is Fiscal Space?
Fiscal space can be defined as ‘the financial resources that
governments can mobilize to finance a certain series of
programmes, without endangering the government’s current or
future financial position or credibility.’

ADB–ADBI Regional Inception Workshop: Strategies for Financing Social Protection to Achieve SDGs in DMCs
17-18 May 2018, ADBI Tokyo, Japan
BACKGROUND: Fiscal Space?
Where can Fiscal Space be found?
Revenues
Four dimensions Deficit financing and debt restructuring
- increase tax rates,
- widen the tax base,
- enhance compliance, Fiscal reserves
- increase other (non-tax) revenues, incl.
foreign aid inflows
Expenditure Illicit financial flows
Two possibilities
- reprioritize existing programmes
- implement existing programmes in a
more cost effective manner. Macroeconomic policies

ADB–ADBI Regional Inception Workshop: Strategies for Financing Social Protection to Achieve SDGs in DMCs
17-18 May 2018, ADBI Tokyo, Japan
RESULTS (preliminary): Indonesia
General government revenue is low and the
Tax revenue is among the lowest of the region
trend is downward.

Social Protection expenditure’s focus is on food subsidies and much less on cash-transfers

ADB–ADBI Regional Inception Workshop: Strategies for Financing Social Protection to Achieve SDGs in DMCs
17-18 May 2018, ADBI Tokyo, Japan
RESULTS (preliminary): Indonesia
baseline
alternative scenario
scenario

The alternative scenario simulates:


- 1ppnt higher revenue growth
- 1.25, tapering off to 0.75ppnts,
higher expenditure growth

This mobilizes up to 2.1%GDP


fiscal space towards 2030

ADB–ADBI Regional Inception Workshop: Strategies for Financing Social Protection to Achieve SDGs in DMCs
17-18 May 2018, ADBI Tokyo, Japan
RESULTS (preliminary): Myanmar

General government revenue has slipped There is potential for increasing tax revenue and
over the past years. non-tax revenue.

ADB–ADBI Regional Inception Workshop: Strategies for Financing Social Protection to Achieve SDGs in DMCs
17-18 May 2018, ADBI Tokyo, Japan
RESULTS (preliminary): Myanmar
baseline
alternative scenario
scenario
The alternative scenario simulates:
- 0.75 ppnts higher revenue
growth
- 0.5 ppnts higher expenditure
growth

This mobilizes up to 1.3%GDP


fiscal space towards 2030

ADB–ADBI Regional Inception Workshop: Strategies for Financing Social Protection to Achieve SDGs in DMCs
17-18 May 2018, ADBI Tokyo, Japan
RESULTS (preliminary): Timor-Leste

Excess withdrawal from the Petrol Fund is


the major public finance issue.

Without oil revenues government would have


fiscal deficits in the range of 50-80% of GDP.

ADB–ADBI Regional Inception Workshop: Strategies for Financing Social Protection to Achieve SDGs in DMCs
17-18 May 2018, ADBI Tokyo, Japan
RESULTS (preliminary): Timor-Leste
baseline alternative
scenario scenario
The alternative scenario simulates:
- cut in non-interest spending (i.e.
reducing excess withdrawal) to
slow down depletion Petrol Fund
- 1.5ppnts higher expenditure
growth after 2021

This mobilizes up to 1.2% GDP


fiscal space towards 2030

ADB–ADBI Regional Inception Workshop: Strategies for Financing Social Protection to Achieve SDGs in DMCs
17-18 May 2018, ADBI Tokyo, Japan
Concluding remarks
With a combination of
- increasing tax and/or non-tax revenues
- reprioritize existing programmes

fiscal space can be mobilized in all countries

The magnitude varies from around 1.25% of


GDP in Myanmar and Timor-Leste to more
than 2% of GDP in Indonesia

To what extend, however, this will be sufficient


to close the SDG gaps remains to be seen.

ADB–ADBI Regional Inception Workshop: Strategies for Financing Social Protection to Achieve SDGs in DMCs
17-18 May 2018, ADBI Tokyo, Japan

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