Using Cost-Benefit Analysis for Effective Government Planning and Budgeting in Indonesia

Using Cost-Benefit Analysis
Photo credit: Robert Pramudarto/USAID EGSA

Following a successful delivery of the Cost-Benefit Analysis (CBA) workshop to staff of Directorate General (DG) Budget, Ministry of Finance in September 2020, the Ministry requested follow-up technical assistance to guide Budget Officers to apply CBA principles to government budget evaluation.

CBA provides a basis for effective decision-making by comparing the costs and benefits of various strategic alternatives. The technical assistance equips budget analysts and planners from DG Budget with the skills and knowledge to evaluate and formulate government budgets by prioritizing efficient and effective programs.

EGSA experts collaborated with DG Budget to develop a practical manual to guide its staff to conduct quantitative ex-post budget evaluation. The manual, which features real case studies from agriculture, tourism, and village development projects, will complement the Ministry’s existing guideline which relies on qualitative evaluation methods.

The “Technical Guideline for Application of Cost and Benefit Analysis Method for Budget Performance Evaluation” was disseminated in a workshop attended by twenty participants from DG Budget on March 25 – 26, 2021.

Participants discussed the application of CBA method on budget evaluation

One of the participants and Budget Analysts at the Indonesian Ministry of Finance, Ms. Riwayati, stated that the workshop gave her a newfound confidence in budget analysis. “The technical guideline will provide us with a step-by-step method of evaluating thematic budget performance. It will help us to scientifically analyze and improve the accountability aspect of our budget management and make informed decisions regarding the use of government budget,” stated Riwayati.

The distribution of limited fiscal resources to contending public expenditure is a crucial challenge to the Government of Indonesia. Therefore, strategic planning and budgeting are prominent factors to economic stability and growth. In order to support these processes, conducting post-evaluation and utilizing the results will help make informed decisions in subsequent planning and budgeting periods. The USAID-EGSA stands deeply committed to working with the Government of Indonesia in strengthening the planning, budgeting, and evaluation processes.

EGSA’s “Technical Guideline for Application of Cost and Benefit Analysis Method for Budget Performance Evaluation” is available in Bahasa Indonesia on USAID’s Development Experience Clearinghouse.

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