In keeping with its goals for sustainable economic growth and an inclusive and equitable economy, Indonesia is committed to avoiding deforestation. As the drivers of deforestation often originate from activities outside of forest borders, it is not enough to solve deforestation by conducting segregated actions targeted to specific forest areas. Indonesia must also work to strengthen the rural economy and improve regional collaboration by working across various administrative jurisdictions that encompass forest governance.In recent years, the Government of Indonesia has made numerous fiscal policy changes to enhance its rural economy, most notably the Village Fund instrument, which has been in effect since 2015.

This study by the Climate Policy Initiative (CPI) provides recommendations on how the Village Fund can be used more effectively for stronger rural economic development, underpinned by sustainable resources management. We looked at national-level data on Village Fund usage and priorities, and we also collected fiscal data on villages in three districts: Katingan and Kotawaringin Timur in Central Kalimantan, and Berau in East Kalimantan.

The full paper is available to download from the CPI website.