The Indonesian government will establish an endowment fund for disaster management in Indonesia in the near future.
The Ministry of Finance allocates a budget of Rp1 trillion in the 2019 State Budget to start the pooling fund scheme.
Head of the Fiscal Policy Agency Suahasil Nazara said the government would hand over the management of the funds through a public service agency (BLU).
The formation of the BLU is still waiting for the same level as government regulations and Presidential Regulations that are still harmonized. However, he ensured that the fund management institution was targeted to be able to operate starting this year.
“In the 2019 State Budget there is already a fund allocation for this pooling fund. The form will be a kind of endowment fund for disaster management,” he said in Jakarta (2/1).
Suahasil said the BLU would later act as administrator of preparedness for disaster management funds. The agency also has the authority to issue catastrophic bonds as debt instruments specifically aimed at handling natural disasters.
“The money will be managed by the BLU. How it is managed, of course there are many options, including whether to buy insurance or be managed in other forms,” he said.
He stated that the special fund refers to the success of Mexico which also applied the same model. He said the managed fund was separate from the regional transfer fund allocation.
Director General of Financing and Risk Management at the Ministry of Finance, Luky Alfirman, revealed that although catastrophic bonds including debt securities, they do not serve as a filler for deficit financing.
The bonds will be purely intended as a source of financing for handling the natural disaster crisis.
Finance Minister Sri Mulyani Indrawati said the fund resembled a disaster insurance mechanism.
She said that budgeting for disasters is not only limited to what is listed in the inventory list of the budgetary use of the National Disaster Management Agency.
But emergency funds are also available for new natural disasters that can be budgeted when a disaster occurs.
“That is what is called the on call fund. For this year, there is around an additional Rp. 7 trillion issued by the government through this mechanism which is outside the BNPB budget,” she said.
In addition to allocating Rp1 trillion in funds for the pooling fund of natural disasters, the government is also drafting rules to insure state property from disaster risk.
Some state assets such as the building of agency ministries and local governments are planned to participate as insured objects.