{
  "title": "Indonesia: Technical Assistance Report-Subnational Government Endowment Funds",
  "publication": "Technical Assistance Reports, March 20, 2024",
  "sourceUrl": "https://www.imf.org/en/publications/technical-assistance-reports/issues/2024/03/20/indonesia-technical-assistance-report-subnational-government-endowment-funds-imf-technical-545733",
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  "summary": "The Indonesian authorities are exploring options for the establishment of subnational government endowment funds and the Ministry of Finance (MoF) has drafted regulations in that context.",
  "sections": [
    {
      "heading": "Background and purpose",
      "content": "- The Indonesian authorities are exploring options for the establishment of subnational government endowment funds.\n- The Ministry of Finance (MoF) has drafted regulations related to such endowment funds.\n- Motivations and objectives for establishing an endowment fund at the subnational level diverge across various stakeholders.\n- Clarity of the objectives and purpose of the endowment fund is critical for informing features of its architecture and ensuring alignment with national fiscal policy objectives."
    },
    {
      "heading": "Key findings",
      "content": "- Establishing endowment funds at a time of fiscal deficit entails a “borrowing-to-save” approach which is not optimal from a fiscal policy perspective.\n- There is a misalignment between:\n  - the design of inflow and outflow rules,\n  - the endowment fund’s objectives,\n  - and the fiscal/economic context.\n- The current draft MoF regulations restrict the investment policy to conform with the law on decentralization enacted in 2022.\n- Regardless of the structure of the endowment fund, it needs to be fully integrated within the budget."
    },
    {
      "heading": "Design, fiscal considerations, and cost assessment",
      "content": "- The report emphasizes that the endowment fund should be aligned with national fiscal policy objectives.\n- The report provides recommendations on:\n  - assessing the full cost of the subnational government endowment fund,\n  - the design and implementation of the fund.\n- Integration within the budget is required irrespective of the endowment fund’s structure."
    },
    {
      "heading": "Regulatory observations",
      "content": "- The draft MoF regulations constrain the investment policy to be consistent with the law on decentralization enacted in 2022.\n- The divergence of stakeholder objectives implies the draft regulations may need refinement to resolve misalignment between rules and objectives."
    },
    {
      "heading": "Recommendations and implementation guidance",
      "content": "- Clarify objectives and purpose of the endowment fund to inform architecture and policy design.\n- Reassess the timing of fund establishment given the fiscal deficit and the “borrowing-to-save” implication.\n- Align inflow and outflow rules with stated objectives and the broader fiscal/economic context.\n- Ensure full budgetary integration of the endowment fund.\n- Improve the draft MoF regulations to address restrictions on investment policy and to better reflect the fund’s objectives and fiscal context.\n\n---\n\n Content in this bundle\n\n- Tarea2024017\n  - Tarea2024017 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Tarea2024017 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/technical-assistance-reports/issues/2024/03/20/indonesia-technical-assistance-report-subnational-government-endowment-funds-imf-technical-545733"
    }
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    "Published: March 20, 2024",
    "Series: Technical Assistance Reports",
    "DOI: https://doi.org/10.5089/9798400268915.019",
    "The Indonesian authorities are exploring options for the establishment of subnational government endowment funds.",
    "The Ministry of Finance (MoF) has drafted regulations related to such endowment funds.",
    "Motivations and objectives for establishing an endowment fund at the subnational level diverge across various stakeholders.",
    "Clarity of the objectives and purpose of the endowment fund is critical for informing features of its architecture and ensuring alignment with national fiscal policy objectives.",
    "Establishing endowment funds at a time of fiscal deficit entails a “borrowing-to-save” approach which is not optimal from a fiscal policy perspective.",
    "There is a misalignment between:",
    "The current draft MoF regulations restrict the investment policy to conform with the law on decentralization enacted in 2022.",
    "Regardless of the structure of the endowment fund, it needs to be fully integrated within the budget.",
    "The report emphasizes that the endowment fund should be aligned with national fiscal policy objectives.",
    "The report provides recommendations on:",
    "Integration within the budget is required irrespective of the endowment fund’s structure.",
    "The draft MoF regulations constrain the investment policy to be consistent with the law on decentralization enacted in 2022.",
    "The divergence of stakeholder objectives implies the draft regulations may need refinement to resolve misalignment between rules and objectives.",
    "Clarify objectives and purpose of the endowment fund to inform architecture and policy design.",
    "Reassess the timing of fund establishment given the fiscal deficit and the “borrowing-to-save” implication.",
    "Align inflow and outflow rules with stated objectives and the broader fiscal/economic context.",
    "Ensure full budgetary integration of the endowment fund.",
    "Improve the draft MoF regulations to address restrictions on investment policy and to better reflect the fund’s objectives and fiscal context.",
    "**Tarea2024017**"
  ],
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