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Indonesia: Staff Report For The 2012 Article IV Consultation—Informational Annex

Author(s):
International Monetary Fund
Published Date:
September 2012
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Annex I—Fund Relations

(As of July 31, 2012)

I. Membership Status: Joined February 21, 1967; Article VIII

II. General Resources Account

SDR MillionsPercent of Quota
Quota2,079.30100.00
Fund holdings of currency1,933.8093.00
Reserve position in Fund145.507.00

III. SDR Department

SDR MillionsPercent of Allocation
Net cumulative allocation1,980.44100.00
Holdings1,761.4488.94

IV. Outstanding Purchases and Loans : None

V. Financial Arrangements

TypeApproval DateExpiration DateAmount Approved (SDR Millions)Amount Drawn (SDR Millions)
EFF02/04/0012/31/033,638.003,638.00
EFF08/25/9802/04/005,383.103,797.70
Stand by11/05/9708/25/988,338.243,669.12

VI. Projected Payments to Fund(SDR millions; based on existing use of resources and present holdings of SDRs):

Forthcoming
20122013201420152016
Principal
Charges/Interest0.110.220.220.220.22
Total0.110.220.220.220.22

VII. Exchange Arrangements

The rupiah has had a de jure free floating exchange arrangement since August 14, 1997, and the current de facto arrangement is floating. The market exchange rate was Rp 9,473 per U.S. dollar as of July 26, 2012. Indonesia has accepted the obligations of Article VIII, Sections 2, 3, and 4, and maintains an exchange system free of restrictions on payments and transfers for current international transactions.

VIII. Article IV Consultation

The last Article IV consultation report (IMF Country Report No. 11/309) was discussed by the Executive Board on October 7, 2011.

IX. Resident Representative

Mr. Milan Zavadjil was the Senior Resident Representative from 2008 to July 2012. He will be replaced in September 2012 by Mr. Benedict Bingham.

Annex II: World Bank-Imf Collaboration

Background

The working relationship between the IMF and the World Bank in Indonesia is acknowledged by both sides to be very strong with joint working programs in many areas and close coordination through frequent meetings between resident offices and with headquarters missions, including the Article IV consultation.

Key Areas with Joint Programs

Budget

  • The reform agenda for budget and treasury remains a high priority for both institutions. The strategic framework for joint work is built into joint Bank/Fund budget missions. Currently, the Bank support is being provided through the GFMRAP program, trust funds, and DPLs, with elements in support of (a) efficient treasury operations, including accounting reforms, improved in. year budget disbursement, and regulatory reform; (b) improved linkages between planning and budget preparation through the implementation of a medium-term expenditure framework, performance budgeting, and the enhancement of budget flexibility at the service delivery level; and (c) improved capacity for budget oversight through systems and organizational reform.

Taxation

  • Taxation is a priority for the Fund and the Bank with improving tax revenues an important issue for both macroeconomic security and the investment climate. The Fund has a longstanding program of support for the tax department in Indonesia. This program has, in recent years, focused on tax policy and donor coordination, with donor coordination quite important given the size of support for a solid program of tax reform in Indonesia. The Bank support for tax administration reform is largely executed through the comprehensive Program for Indonesian Tax Administration Reform (PINTAR), which was approved in 2009, and trust funds. The participants will check with their respective colleagues, but generally anticipate that the current division of labor will continue.

Asset Liability Management

  • The Bank and Fund have been leading an effort to improve asset liability management, including at the Treasury and Debt Management Office of the Ministry of Finance and Bank Indonesia. We envision that the Bank and Fund team will continue to work together as needed.

Financial Sector

  • The Bank has focused on broad monitoring of the financial sector with special emphasis on issues that are important for the investment climate (as part of Development Policy Loan programs). Most recently, through its Financial Sector and Investment Climate Reform and Modernization Development Policy Loan, the Bank is supporting the implementation of reforms aimed at maintaining stability, increasing diversification, and enhancing financial sector inclusion in Indonesia. The Fund has concentrated on the banking system per se, with emphasis on bank regulation and supervision. A joint Bank/Fund FSAP was completed in 2010 and some recommendations have been followed through by the authorities. The Bank is to provide technical assistance to implement select FSAP recommendations concerning nonbank financial sector.

Statistics

  • The Bank has a major program with the statistics agency that was launched in 2010. The program is being designed to focus on improvements in key statistical series that should improve the ability to understand the Indonesian economy, executed through an institution-wide approach, i.e., including significant IT and personal/institutional reforms. There is a quick-wins program being introduced while the longer-term reforms play out, and the Fund has indicated that it is prepared to continue to assist in the area of government finance statistics.

Macroeconomics

  • The Fund continues to take the lead in macroeconomic areas, with the Article IV and other missions, staff reports, and policy notes on arising issues, including the stance of fiscal, monetary, and exchange rate policies, the credibility and effectiveness of monetary policy, macrofinancial linkages, and how events in the global economy are likely to impact Indonesia. The Bank has also taken on a larger role, including on macroeconomic monitoring, public policy dialogue, and capacity building, and there is an ongoing need for close coordination with the Fund. The Bank team has been assisting the Ministry of Finance, Fiscal Policy Office, to improve capacity for macroeconomic monitoring, forecasting, and evidence-based macroeconomic and fiscal policy analysis.

These threads of work are expected to be continued by both parties, and regular meeting(s) will explore other ways to improve existing synergies. These include keeping each other informed about ongoing work, and requests to each other in areas of interest and through periodic meetings. Issues being addressed include, for the Fund, the impact of structurally high inflation rates and associated higher volatility on real interest rates; and for the Bank, the link between macro/fiscal policy and real economic outcomes including growth and poverty, resource-sector fiscal revenues, and longstanding problems in the implementation and effectiveness of government spending.

Indonesia: JMAP Implementation
TitleProductsProvisional Timing of MissionsExpected Delivery Date (Tentative)
A. Mutual Information on Relevant Work Programs
Bank work programIndonesia Economic QuarterlyLaunched in April and July 2012; next issues due September and December 2012
World Bank follow up work related to WB/IMF Financial System Assessment Program missions (October 2009 and February/March 2010)Ongoing
Development of the first in a new Development Policy Loan series—Institutional, Tax Administration, Social and Investment (INSTANSI)—plus a Financial Sector and Investment Climate Reform and Modernization (FIRM) Development Policy Loan and a Connectivity Development Policy LoanNovember 2012
IMF work program2011 Article IV missionJuly 2011Board discussion took place in October 2011
Tax administration technical assistanceJuly 2011Ongoing
2012 staff visitJanuary 2012
2012 Article IV missionJuly 2012Board discussion expected in September 2012
B. Request for Work Program Inputs
Fund request to BankAssessment of economic developments and structural policiesOngoing
Information sharingOngoing
Bank request to FundAssessment of macroeconomic developments and policiesOngoing
Information sharingOngoing
Government Financial Statistics trainingJune 2011
C. Agreement on Joint Point Products and Missions
Joint work programAsset liability managementDecember 2010

Annex III: Relations With The Asian Development Bank

(As of December 31, 2011)

Asian Development Bank (ADB) cumulative loans to Indonesia reached $27.17 billion as of end-December 2011. In 2011, the ADB approved a total of $580 million to Indonesia or 3 percent percent of the total loans approved by the institution for the year. The sectors with the largest shares in cumulative lending are public sector management (17.5 percent), agriculture and natural resources (14.9 percent), finance (14.5 percent) and energy (14.1 percent).1

Between 1966 and 2011, ADB provided 517 Technical Assistance grants to Indonesia amounting to $359.1 million. The TA grants were financed from ADB’s Technical Assistance Special Fund, the Japan Special Fund, and other sources. Measured by cumulative TA approvals, Indonesia is the second largest recipient of TA support from the ADB.

ADB approved a new Country Partnership Strategy 2012–2014 (CPS) with the Government of Indonesia covering the period 2012–2014. The strategy is aligned with the Government’s medium-term development plan for 2010–2014 as well as the Masterplan for the Acceleration and Expansion of Indonesia Economic Development 2011–2025. The CPS is closely attuned to the needs of Indonesia as large middle-income country and guided by the government’s commitment to “pro-poor, pro-job, pro-growth and pro-environment” development. The two strategic CPS pillars are inclusive growth and environmental sustainability with climate change, mitigation and adaptation. ADB will support government efforts to achieve more inclusive growth by helping to connect poor people and regions to market by upgrading infrastructure improving logistics, and enhancing skills base needed to boost investment, productivity, and employment, and by strengthening local government’s capacity for public service delivery.2

Table III.1.Sovereign and Nonsovereign Loan Approvals and Disbursements to Indonesia(In millions of U.S. dollars)
20042005200620072008200920102011
Loan approvals225.001,145.69784.801,187.101,085.002,184.20785.00580
Loan disbursement593.501,014.991,025.881,136.30949.60739.301,079.80631.9
Sources: Asian Development Bank, Annual Report (various editions).
Sources: Asian Development Bank, Annual Report (various editions).
Table III.2.Cumulative Lending to Indonesia(As of December 31, 2011)
SectorLoans (No.)Amount (US$ millions)Percent 1/
Agriculture and natural resources994,047.0014.89
Education322,222.358.18
Energy323,831.0514.10
Finance223,926.1014.45
Health and social protection131,068.303.93
Industry and trade12645.702.38
Public sector management194,767.2217.54
Transport and ICT342,893.8610.65
Water supply and other municipal321,984.747.30
Infrastructure and services
Multisector181,686.220.00
Total31327,172.54100.00
Sources: Asian Development Bank, Indonesia Fact Sheet 2012.

Total may not add up because of rounding.

Sources: Asian Development Bank, Indonesia Fact Sheet 2012.

Total may not add up because of rounding.

Annex IV: Statistical Issues

I. Assessment of Data Adequacy for Surveillance
General: Indonesia’s macroeconomic statistics are broadly adequate to conduct effective surveillance.
National accounts: Annual and quarterly GDP data are published in a timely manner for both expenditure and production sides with 2000 as the base year. The estimates are based on a limited set of indirect indicators of uncertain quality. Some sectors are influenced strongly by seasonality, and seasonally adjusted data are prepared but not published. In addition, no survey of nonfinancial services is prepared. The Fund has recommended: (i) development of a system to continuously update the census of businesses; (ii) introduction of comprehensive annual establishment surveys for nonfinancial services industries; (iii) publication of annual GDP estimates, including a time series of at least 20 years; (iv) development of a set of annual supply and use tables (SUTS) starting from 2000; and (v) enhancing the convergence exercise on trade data between Bank Indonesia (BI) and Ministry of Finance (MOF). The revision of the base year of national accounts to 2010 is in progress with technical assistance from STA, and GDP estimates based on improved data sources and methodology are expected by 2013. Price statistics: Price statistics are broadly adequate for surveillance.
Government finance statistics: Available government finance data suffer from a number of weaknesses, in terms of classification, coverage, and timeliness. Data on the budget of the central government are available with a one-month lag, but subnational (provincial and local) government data are available only with a lag of two years, and the quality of this data is variable. Problems in budget and accounting systems have been compounded by the recent decentralization initiatives, which have shifted substantial resources to the subnational governments. Substantial efforts are in train, and significant progress has been made to overcome these problems, ranging from the planned adoption of advanced accounting and statistical standards, to the introduction of best practice budget management processes, and the development of computerized financial management information systems. Against this background, the MOF and the Ministry of Home Affairs are committed to keeping the requirements of fiscal statistics at the forefront of ongoing fiscal reforms, so as to make better statistical monitoring one of the goals of the current efforts. The coverage and timeliness of public debt statistics is generally adequate. The new expenditure classification introduced in the 2005 budget is generally consistent with the Government Finance Statistics Manual 2001 (GFSM 2001) on functional codes and classification, although the data are compiled on a cash basis. The authorities have committed to adopting GFSM 2001 standards. To this end, the Fund staff has recommended in the short term: (i) establishment of a register of all extrabudgetary units; and (ii) inclusion of the economic codes consistent with the GFSM 2001 in the chart of accounts to ensure that general government units report all transactions and balances over which they exert control. Over the medium term, priority should be given to (i) establishing the underlying reporting arrangements necessary to obtain timely preliminary data for local government statistics; and (ii) developing GFSM 2001 operating statements, statements of sources and uses of cash, and partial balance sheets, all of which should be published on the MOF websites. Currently a system has been set up to allow for an automatic conversion of budget files to GFSM 2001 data; however, these data are yet to be published on the MOF website.
Monetary and financial statistics (MFS) and financial soundness indicators (FSIs): Good quality monetary statistics are compiled by BI on a timely basis. With STA assistance, BI has compiled and reported monetary data using the Standardized Report Forms (SRFs), from which an integrated database and alternative presentations of monetary statistics can be drawn to meet the needs of BI and the Fund. Bank Indonesia has also compiled monetary data for Other Financial Corporations (OFCs), comprising only finance companies. To strengthen monetary statistics, STA missions have also recommended the expansion of the coverage of Other Depository Corporations (ODCs) to include mutual funds and the coverage of OFCs to include insurance companies and pension funds. Additional challenges include timely revisions of published banking sector data after supervisory verification. In addition, with assistance from STA, BI has compiled and reported FSIs to the Fund, which are published on the IMF’s FSI website. The FSIs were initially reported on a semi-annual basis. However, starting with the Q4:2011 data, BI has started reporting quarterly FSIs to the Fund. The FSIs for Indonesia comprise of 11 core FSIs, 12 encouraged FSIs for deposit takers, 2 encouraged FSIs for OFCs, and 3 encouraged FSIs for Real Estate Markets. A STA mission in 2011 has recommended BI to coordinate with other relevant institutions to explore the possibility to compile FSIs for Nonfinancial Corporations and Households.
Balance of payments: Trade data have been improved during recent years. Starting in with 2006, the import/export transactions of free trade zones are covered in goods data of balance of payments statistics. For the capital and financial account, the methodological basis for the compilation of FDI data needs substantial improvement. Inflows are currently calculated based on loan disbursements to companies that have foreign equity using a fixed ratio to estimate equity inflows. Surveys conducted by BI to collect FDI data have a low response rate and the coverage of the directory of enterprises should be improved. Other areas that need improvement include the recording of trade credits and the asset data for portfolio investment and other investment transactions. The magnitude of the errors and omissions item has been significant at times and appears to be related to the under-coverage of assets in the financial account. Financial transactions data are reconciled with changes in the International Investment Position (IIP), except for data on direct investment. An annual IIP is compiled, but the underlying data are weak in several areas, notably for FDI. External debt statistics have improved considerably with the introduction of an External Debt Information System (EDIS) in 2002 and the recent initiative to publish monthly indicators. Also, as a result of the ongoing reconciliation of data conducted by BI, the IIP and external debt data are fully consistent. However, improvements are still needed with respect to components of private corporate sector data, particularly in distinguishing between scheduled and actual debt service, in estimating the accumulation/reduction of private sector payments arrears, and in estimating rescheduling and debt reductions received by the private sector from external creditors.
II. Data Standards and Quality
Subscriber to the Special Data Dissemination Standard (SDDS) since September 1996, observing most of the SDDS requirements. It uses SDDS flexibility options for the timeliness of the labor market categories (employment, unemployment, and wages/earnings) and general government operations. It is also availing itself of flexibility options for the periodicity of labor market categories (employment and unemployment).Data ROSC completed in 2005.
Indonesia: Table of Common Indicators Required for Surveillance(As of August 8, 2012)
Date of Latest ObservationDate ReceivedFrequency of Data1Frequency of Reporting1Frequency of Publication1Memorandum Items:
Data Quality—Methodological soundness2Data Quality—Accuracy and Reliability3
Exchange rates8/8/128/8/12DDD
International reserve assets and reserve liabilities of the monetary authorities47/128/12MMM
Reserve/base money7/128/12W/MW/MW/MO, LO, O, OLO, O, O, LO, O
Broad money6/128/12MMM
Central bank balance sheet6/127/12MMM
Consolidated balance sheet of the banking system6/128/12MMM
Interest rates58/8/128/8/12DDD
Consumer price index7/128/12MMM
Revenue, expenditure, balance and composition of financing6—central government6/127/12MMMid yearLNO, LNO, LO, LNOLNO, LO, LO, LO, LNO
Stocks of central government and central government–guaranteed debt3/126/12QQQ
External current account balance3/125/12QQQLO, LO, LO, LOLO, O, LO, O, O
Exports and imports of goods and services6/128/12MMM
GDP/GNP6/128/12QQQLO, LO, O, LOLO, LO, LO, LO, LNO
Gross external debt75/127/12MMM
International investment position820104/12AAA

Daily (D); Weekly (W); Monthly (M); Quarterly (Q); Annually (A); NA: Not Available.

Reflects the assessment provided in the data ROSC published on July 20, 2005 (based on the findings of the mission that took place during March 28 April 11, 2005), for the dataset corresponding to the variable in each row. The assessment indicates whether international standards concerning concepts and definitions, scope, classification/sectorization, and basis for recording are fully observed (O); largely observed (LO); largely not observed (LNO); not observed (NO); and not available (NA).

Same as footnote 7, except referring to international standards concerning source data, assessment of source data, statistical techniques, assessment and validation of intermediate data and statistical outputs, and revision studies.

Any reserve assets that are pledged or otherwise encumbered should be specified separately. Also, data should comprise short-term liabilities linked to a foreign currency but settled by other means as well as the notional values of financial derivatives to pay and to receive foreign currency, including those linked to a foreign currency but settled by other means.

Both market based and officially determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

Including currency and maturity composition.

Includes external gross financial assets and liability positions vis à vis nonresidents.

Daily (D); Weekly (W); Monthly (M); Quarterly (Q); Annually (A); NA: Not Available.

Reflects the assessment provided in the data ROSC published on July 20, 2005 (based on the findings of the mission that took place during March 28 April 11, 2005), for the dataset corresponding to the variable in each row. The assessment indicates whether international standards concerning concepts and definitions, scope, classification/sectorization, and basis for recording are fully observed (O); largely observed (LO); largely not observed (LNO); not observed (NO); and not available (NA).

Same as footnote 7, except referring to international standards concerning source data, assessment of source data, statistical techniques, assessment and validation of intermediate data and statistical outputs, and revision studies.

Any reserve assets that are pledged or otherwise encumbered should be specified separately. Also, data should comprise short-term liabilities linked to a foreign currency but settled by other means as well as the notional values of financial derivatives to pay and to receive foreign currency, including those linked to a foreign currency but settled by other means.

Both market based and officially determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

Including currency and maturity composition.

Includes external gross financial assets and liability positions vis à vis nonresidents.

ADB. 2012. Indonesia Factsheet 2012. Manila.

ADB. 2012. Country Partnership Strategy 2012–2014. Manila.

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