<![CDATA[The first-year budget absorption of Foreign Loans and Grants (FLG) projects is an important indicator of government project performance. However, several FLG-funded projects at the Ministry of Health have not achieved their budget absorption targets. This study aims to analyze the implementation of Good Governance principles, first-year budget absorption performance, and the role of project readiness. This study employed a qualitative case study approach on the Indonesia Health Systems Strengthening (IHSS) Project. Data were collected through in-depth interviews, observations, and document analysis using purposive sampling. Data were analyzed using the Miles, Huberman, and Saldaña interactive model through open coding and axial coding. Data credibility was ensured through source triangulation, technique triangulation, and member checking. The findings show that Good Governance principles have been implemented through transparency, accountability, responsibility, independence, and fairness. Nevertheless, first-year budget absorption remained suboptimal due to delays in project organization, limited human resource capacity, the complexity of international procurement, the No Objection Letter (NoL) approval process, and uneven hospital readiness. The study concludes that Good Governance provides the foundation for effective FLG project management, while project readiness plays a critical role in achieving optimal budget absorption.]]>
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