Finance Ministry Launches Disaster Pooling Funds Scheme

TEMPO.CO, Jakarta - The Indonesian Finance Ministry introduced innovative funding in the form of pooled funds for disasters or Disaster Pooling Fund (PFB). The fund scheme was launched through the issuance of Presidential Regulation No. 75 of 2021 on the pooled funds for disaster mitigation, which was passed on August 13, 2021.

“PFB is a milestone in disaster risk management in Indonesia because it increases the capacity of disaster risk funding, especially disaster mitigation and risk transfer,” said the ministry’s Head of the Fiscal Policy Agency, Febrio Kacaribu, in Jakarta, Monday, August 23.

The innovative scheme was launched in consideration of the World Bank's analysis in 2018 that placed Indonesia in 12 out of 35 countries that face the greatest risk due to natural disasters.

Based on the ministry’s study, Indonesia experienced budget constraints in its disaster mitigation. The average value of direct damages has reached Rp20 trillion per year for the past 15 years.

On the other hand, reserve funds in the State Budget for emergency response activities, including rehabilitation and reconstruction, were still below the damage value, or at around Rp5 trillion to Rp10 trillion per year since 2004.

Thus PFB, with the initial funds of around Rp7.3 trillion, was expected to close the funding gap and accelerate the disaster mitigation process. “PFB will increase the government's disaster funding capacity from only two existing main sources, namely State Budget and Regional Budget,” said Febrio.

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