Public expenditure on household-basedsocial assistance (SA) in Indonesia has increasedsignificantly since 2005. From a low base in the early2000s, Indonesia's aggregate national publicexpenditures on SA permanently increased from 2005 after thecentral government allocated a portion of the savings fromfuel subsidy reforms to a number of SA initiatives. In 2010,national expenditures on SA are estimated at Rp 29,709billion (US$ 3.3 billion), equivalent to 2.6 percent oftotal national expenditures and 0.5 percent of grossdomestic product (GDP). Indonesia's strong fiscalposition leaves Indonesia well placed to further increase SAexpenditures. Declining debt payments and subsidy reductionshave opened up fiscal space over the past decade andsupported a general increase in social sector and SAspending. With debt-to-GDP of just 25 percent in 2010,Indonesia could further increase expenditure on both itemswithout raising debt levels. Nonetheless, currentexpenditures on SA are dwarfed by spending on regressiveenergy subsidies which in some years consume over 20 percentof total national expenditures. The increase in spendingafter 2005 primarily reflects greater central governmentinvestment in programs to protect poor households from fueland food shocks as well as large health and educationexpenses. The central government is the dominant player inthe SA sector, accounting for almost 90 percent of totalexpenditures. In years when the government has increasedregulated fuel prices (2005-06 and 2008-09), the largestcompensatory SA response has been an unconditional cashtransfer program (BLT) to vulnerable households to helpcushion them from the inflationary shock.
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