Indonesia’s Striking Success in Extreme Poverty Reduction: World Bank Report

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According to the World Bank, Indonesia’s remarkable progress in reducing extreme poverty has practically achieved the goal of zero percent by 2024.

The Country Director of World Bank Indonesia, Satu Kahkonen, stated that “Indonesia can be said to have achieved its goal of eradicating extreme poverty when it reached 1.5 percent in 2022” in the “Indonesia Poverty Assessment-Pathways Towards Economic Security” report released on Tuesday (9/5/2023) in Jakarta. This progress is reflected in regions that were previously left behind but have now caught up, except for Nusa Tenggara and Maluku-Papua.

Extreme poverty has significantly decreased in the last 20 years, from 19 percent to 1.5 percent in 2022. Extreme poverty is defined as living on less than US$1.90 2011 PPP (purchasing power parity) per day.

The World Bank’s Indonesia Poverty Assessment report stated, “The practical achievement of the government’s goal of eradicating extreme poverty is faster than the expected schedule in 2024.”

Sustainable economic growth, along with social protection, including social assistance, has enabled this progress. The World Bank even assessed that social assistance in Indonesia was more effective in reducing poverty than energy subsidies.

Meanwhile, the World Bank considers Indonesia as a candidate for an upper-middle-income country and believes that it needs to redefine extreme poverty.

Lower-middle-income countries use a higher poverty line of US$3.20 PPP 2011 per day. The Indonesian government’s focus should also include economically insecure households that are vulnerable to falling back into poverty.

“Is Indonesia ready to face this challenge? Human resource outcomes are still unsatisfactory, and there are still worrying geographical disparities,” the report noted.

Furthermore, low worker productivity still hinders households from being economically secure. Various shocks, including climate, continue to threaten poverty reduction efforts in Indonesia.

Despite these challenges, Indonesia’s progress in reducing extreme poverty is a significant achievement that deserves recognition. The government’s efforts, along with the private sector’s support and the resilience of the Indonesian people, have contributed to this success.

However, the government needs to continue to address the remaining challenges to ensure sustainable poverty reduction and inclusive economic growth.