2017 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Indonesia


2017 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Indonesia

Fund Relations

(As of November 30, 2017)

Membership Status: Joined February 21, 1967; Article VIII

General Resources Account

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SDR Department

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Outstanding Purchases and Loans: None

Financial Arrangements

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

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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 13,560 per U.S. dollar as of October 31, 2017. 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.

Article IV Consultation

The last Article IV consultation report (IMF Country Report No. 17/37) was discussed by the Executive Board on January 25, 2017.

Resident Representative

Mr. John Nelmes has been the Senior Resident Representative since September 2016.

World Bank-IMF Collaboration

The working relationship between the IMF and the World Bank in Indonesia is very strong, with joint working programs and close coordination through frequent meetings between resident offices and missions from headquarters, including during the Article IV consultation.

Key Areas with Joint Programs

Budget Reforms

  • The reform agenda for budget and treasury remains a high priority for both institutions. Currently, the World Bank’s support is being provided through the Public Financial Management Multi-Donor Trust Fund (PFM-MDTF) and Support for Enhanced Macro-Economic and Fiscal Programmatic Assistance (SEMEFPA) programs, as well as development policy loans (DPLs), with elements in support of (a) promoting budget efficiency; (b) improving subnational transfers; (c) supporting more strategic management of PFM across units at MoF; (d) public expenditure reviews (a multi-phase PER is ongoing); and (e) improved composition of spending, budget execution and efficiency of spending. Highlights of the engagement includes:

    • In 2015, Indonesia completed rollout of a treasury financial management information system, the Sistem Perbendaharaan dan Anggaran Negara (SPAN), which was financed with a World Bank loan and whose implementation was supported by the PFM-MDTF.

    • A Public Expenditure and Financial Accountability (PEFA) assessment was completed in November 2017. PEFA documents an overall improvement in the core PFM system across the budget cycle and finds Indonesia has a strong legal and regulatory framework, and a PFM system largely aligned with international standards. It also identifies challenges such as the management of contingent liabilities and the reliability of budget projections.

    • An ongoing series of Development Policy Loans on fiscal reforms (“Fiscal DPL series”) supports reforms to enhance the allocative efficiency and effectiveness of public spending.

  • The IMF has complemented this work through recent technical assistance (TA) on developing a medium-term expenditure strategy.

Taxation Issues

  • Revenue (tax and nontax revenue) issues are a priority for the IMF and the World Bank, with broadening the revenue base and increasing revenues an important issue for both macro-fiscal stability and the investment climate. The Fund conducted a mission on tax policy and administration in September 2017 to develop a medium-term revenue strategy (MTRS). The Bank provides tax policy (including international tax) and administration support through trust funded TA to the Fiscal Policy Agency and DG Tax, and the ongoing Fiscal DPL series. The Bank has also been providing analytical support on nontax revenue administration through the Natural Resources for Development program. The next phase of reforms, to be implemented under a government-owned MTRS, envisions changes to tax laws and improvements to tax administration to improve compliance.

Asset-Liability Management

  • The World Bank and IMF have been leading an effort to improve asset-liability management, including at the Treasury and Debt Management Office of the Ministry of Finance and at Bank Indonesia, with continued collaboration envisaged, as needed.

  • The Bank has been providing technical assistance to the middle-office of the DGBFRM under the Government Debt and Risk Management (GDRM) program. The TA has been focused on building cost-risk models for debt management strategy development, improved quantification and analysis of risks related to contingent liabilities related to support to infrastructure development, establishing a framework for government guarantees, and the joint IMF-World Bank support to Sovereign Asset Liability Management (SALM). The program is entering its second phase, and discussions on potential further support are ongoing.

Crisis Preparedness

  • In recent years, the World Bank has focused on supporting the authorities in Indonesia to create a robust crisis prevention and management framework. Most recently, this support has included analysis of the financial sector stability framework through the 2017 FSAP and initial discussions have been held on support to MoF on developing a fiscal crisis monitoring protocol. The IMF has supported work in this area through past TA on reviewing the legal framework underpinning Indonesia’s financial stability architecture and in its current surveillance dialogue with the authorities and exchange of views with the Bank.

Financial Sector

  • The World Bank has a broad technical assistance program covering Financial Sector Stability, Financial Inclusion and Long Term Finance and Risk Management. A FSAP has been completed in 2017 and found the banking system to be profitable, well capitalized and resilient to severe shocks. The existing financial sector advisory activities are being brought together under a Programmatic Approach, Indonesia Financial Sector Technical Assistance (IFSTA), which will form the basis for sector engagement until 2022. The technical assistance program complements existing investment lending operations (concentrated in infrastructure finance) and is intended to serve as a basis for future lending, most immediately an upcoming Development Policy Loan (DPL) which will seek to address further reforms, particularly in the area of financial stability, guided by the FSAP recommendations.


  • The World Bank had a program of capacity building with the statistics agency that was launched in 2011 and closed in 2016. The IMF has focused recent training and TA on government finance statistics, monetary and financial statistics, sectoral accounts and balance sheets, and on measuring natural resources.


  • The IMF continues to take the lead in monetary and exchange rate policies, with the Article IV mission and staff visits, focusing on fiscal, monetary, and exchange rate policies; macro-financial linkages, financial sector reforms, and crisis management, as well as the external position and spillover effects. The Fund also updates the Debt Sustainability Analysis at the time of the Article IV consultation. The Bank has also taken on a larger role, including on macroeconomic monitoring, macroeconomic policy dialogue, fiscal policy analysis and capacity building, with ongoing coordination with the Fund. The Bank continues to assist the Ministry of Finance’s 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 institutions, with periodic meetings aimed at keeping each other informed about ongoing work and joint areas of interest. Issues being addressed by the IMF include domestic and external vulnerabilities, exchange rate management, medium-term external and fiscal sustainability, and macro-financial linkages and financial stability risks; and by 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.

Joint Managerial Action Plan, 2016–17

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Relations with the Asian Development Bank

Indonesia is an Asian Development Bank (ADB) founding member since 1966. ADB has approved $32.7 billion in sovereign and nonsovereign loans (excluding cofinancing), and $894.02 million in technical assistance and grants for Indonesia. Cumulative disbursements to Indonesia for lending and grants financed by ordinary capital resources, the Asian Development Fund, and other special funds amount to $26.11 billion. The sectors with the largest shares in cumulative ADB assistance are public sector management (18.8 percent), energy (17.5 percent), agriculture and natural resources (13.2 percent), and finance (13 percent).1

The total indicative lending program for sovereign operations for 2018–2020 amounts to $7.45 billion. About $1.22 billion in cofinancing is anticipated. The lending pipeline will focus on the energy sector (42 percent of total lending); public sector management (18 percent); agriculture, natural resource, and rural development (15 percent); education (13 percent); finance (6 percent); and water and urban services (6 percent). The nonlending program for 2018–2020, which amounts to $43.55 million, consists of a grant and 26 technical assistance (TA) projects, including 12 TA projects with a total value of $7.55 million financed from ADB’s Technical Assistance Special Fund (TASF).

Development Partnership Framework

The ADB’s support to Indonesia is guided by the Country Partnership Strategy, which in turn is aligned to the National Medium-Term Development Plans (RPJMN) and ADB’s Strategy 2020 Midterm Review. The current Country Partnership Strategy (2016-2019) aims to support Indonesia in achieving higher, more inclusive, and environmentally sustainable growth. The CPS focuses on three high-priority areas, as defined by the RPJMN: (i) improved infrastructure services, (ii) better economic governance, and (iii) enhanced human resource development.

On infrastructure ADB is supporting better policies, institutional arrangements, and strategic investment programs. ADB support will complement the government’s rural electrification program, improvements in renewable energy policy and finance investments to extend the reach, reliability, and efficiency of the national electricity grid, and to foster greater use of clean sources of energy. ADB will provide a combination of policy support, rural irrigation and water supply infrastructure investment, and support for development of value-chains and diversification into high-value agricultural commodities. These measures will improve rural productivity and create wider employment and off-farm opportunities for small farmers and landless laborers. ADB will integrate climate mitigation and adaptation into infrastructure projects and introduction of new technology will be prioritized.

On economic governance, ADB will support fiscal reforms to aid government efforts to protect critical public spending and to boost revenue mobilization over the medium to long term. Support will be provided to assist the government strengthen the medium-term expenditure framework, and protect priority public expenditure on infrastructure, health, education, and social protection, in line with the SDGs. To strengthen public sector management and service delivery, ADB support will help strengthen tax administration capacity at the sub-national level, as well as improve efficiency, transparency, and accountability by using information technology.

ADB will continue to assist in deepening the finance sector by improving market infrastructure and encouraging product diversification in the bond market. ADB will support enhanced financial inclusion by addressing regulatory impediments, poor financial literacy, weak consumer protection, and by developing innovative microcredit products to better meet the needs of the poor. ADB will provide advisory, technical, and financial support to small and medium-sized enterprises to enable them to build viable value-chains and integrate into regional and global markets.

On human resources development, ADB support will be focused primarily on improving education quality and skills development. ADB will assist government efforts to improve the quality and relevance of education spending through support for education policy reforms, improved education sector management, and for the design and implementation of key government reform programs.

The Country Partnership Strategy is underpinned by three-year rolling Country Operations Business Plan (COBP). The COBP 2018–2020 reflects efforts to further enhance ADB’s development effectiveness in Indonesia, including: (i) focusing on long-term engagement and a programmatic approach in core sectors; (ii) incorporating knowledge, innovation, and high quality technology in projects; (iii) ensuring project readiness and quality-at-entry to minimize implementation delays; (iv) deepening the partnership with executing and implementing agencies; (v) enhancing the capacity and flexibility to effectively respond to the government’s evolving needs and priorities; and (vi) applying an effective and balanced mix of ADB’s assistance modalities. ADB is also redoubling efforts to maximize synergies between sovereign and nonsovereign operations including the promotion of public-private partnerships in Indonesia.

Figure 1.
Figure 1.

Relations with the Asian Development Bank

Citation: IMF Staff Country Reports 2018, 032; 10.5089/9781484340622.002.A002

Source: Asian Development Bank.
Table 1.

Sovereign Loan Approvals and Disbursements to Indonesia

(In millions of U.S. dollars)

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Source: Asian Development Bank.
Table 2.

Cumulative Lending, Grant and Technical Assistance to Indonesia

(As of December 2016)

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Source: Asian Development Bank, Indonesia Fact Sheet 2016.

Total may not add up because of rounding.

Statistical Issues

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Indonesia: Table of Common Indicators Required for Surveillance

(As of December 8, 2017)

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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).

Including currency and maturity composition, 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.