Indonesia urged to continue high health and social security spending post-coronavirus

16 Jul 20

Further high-level spending on health and social assistance programmes will be needed in Indonesia once the Covid-19 pandemic is over, the World Bank has said.

Indonesia_istock.jpg

Jakarta, Indonesia

Jakarta, Indonesia

 

The south-east Asian country responded to the crisis with a fiscal package worth 4.3% of its GDP, including measures to improve the preparedness of its health sector and a substantial increase in welfare and income support for people in poverty.

Together with lower revenues, this is expected to widen the fiscal deficit to 6.3% of GDP in 2020.

According to the World Bank, which has released a report into Indonesia’s economic prospects, without the expansion of social assistance measures as many as 5.5 million people could have fallen into poverty because of Covid-19.

“It is essential that the package is now effectively implemented to have the fullest impact on the people and the economy,” said Satu Kahkonen, World Bank country director for Indonesia and East Timor, who went on to praise the government’s “robust response” and desire “to turn this crisis into an opportunity”.

The report urges the government to build on the pandemic-driven expansion in spending on social protection, and accelerate the delivery of universal healthcare.

A health system that ensures affordable access to quality services would support a healthier and more productive workforce, the report states.

“Commendable progress” has already been made in this regard, with annual health spending having increased by 22% between 2001 and 2018 and the government’s national health insurance scheme covering 83% of the population, the report adds.

But Indonesia compares poorly with its peers on several key health metrics, especially concerning maternal health and nutrition – and there are still large geographic and income-related inequalities.

It spent 1.4% of GDP on the sector in 2018 – about half as much as other countries with similar incomes.

And this has been generally skewed towards curative rather than preventative care, leaving the government with lots of work to prepare its health system for Covid-19 in a very short time.

“To effectively curb the impact of the pandemic, the government’s decision to shift spending priorities and increase the budget deficit was absolutely necessary,” said Frederic Gil Sander, World Bank lead economist for Indonesia.

“Going forward, higher spending on health, social protection and infrastructure will still be needed, which makes tax reforms to raise fiscal revenues of paramount importance to flatten the debt curve and maintain Indonesia’s strong macroeconomic framework.”

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