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Finance Ministry urges local govts to diversify infrastructure funding amid budget cuts
The government plans to provide assistance in setting up new funding schemes for infrastructure development, including more progressive PPP schemes, municipal bonds, as well as project-linked sharia sovereign bonds (SBSN), according to Brahmantio.
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Infrastructure push: Workers make upgrades to railway infrastructure at Jatinegara Station in East Jakarta on April 4, 2018. (JP/P.J. Leo)
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he Finance Ministry has urged regional administrations to look at alternative funding schemes, including public-private partnerships (PPP) and blended financing, to continue infrastructure development, as the state and regional budget will be geared toward fighting COVID-19.
The prioritizing of COVID-19 recovery efforts in the state budget and regional budgets is expected to continue until 2022, according to the ministry’s director of state financial risk management, Brahmantio Isdijoso, on Wednesday.
“We expect budget cuts for infrastructure projects and, therefore, we need to find new ways to fund the projects,” he said during an online discussion held by the ministry.
The government plans to provide assistance in setting up new funding schemes for infrastructure development, including more progressive PPP schemes, municipal bonds, as well as project-linked sharia sovereign bonds (SBSN), according to Brahmantio. The schemes will complement the existing ones, such as viability gap funds (VGF) — a government subsidy to boost the financial feasibility of infrastructure projects.
Going forward, the government will seek to utilize alternative funding schemes to spur development in five sectors, namely water and sanitation, housing, urban transportation and waste management, he said.
The government is currently focusing its efforts on the ongoing health crisis, including by reallocating funds from the state budget, despite falling state revenue due to the pandemic’s impact on the economy.
The Public Works and Housing Ministry, which is in charge of the country’s infrastructure projects, has had its 2020 budget slashed by Rp 44.5 trillion (US$3 billion) to Rp 85.7 trillion as funds were reallocated for COVID-19-related spending.
