As always, Indonesia¡¯s national poverty line remains the most relevant measure for country-specific policy discussions, while the new global poverty measures are intended for benchmarking Indonesia with other counties. Indonesia¡¯s official poverty lines are set at the provincial level (separately for urban and rural areas) and the poverty rate stood at in September 2024.
The new international poverty lines are set at higher levels than the previous benchmarks. The international poverty lines are based on national definitions set by individual governments. In recent years, many governments around the world have increased the value of their national poverty lines.
Due primarily to these changes, and to a lesser extent global changes in the cost of living, the global benchmark poverty lines have increased as well. The new international extreme poverty line, defined as the typical value of the national poverty lines set by low-income countries, is now set at $3.00 per day (equivalent to about 546,400 Rupiah per month after accounting for Indonesia¡¯s cost of living). The other two international poverty lines are defined as the typical value of the national poverty lines among the LMIC countries, set at $4.20 per day (about 765,000 Rupiah per person per month), and among UMIC countries at $8.30 per day (about 1,512,000 Rupiah per person per month).
ľ¹ÏÓ°Ôº¡¯s poverty estimates are intentionally different from the national poverty definitions used by most governments. National and international definitions of poverty are intentionally different because they are used for different purposes. National poverty lines are established by governments and are specialized for a country¡¯s unique context. They are used to implement policy at the national level, such as targeting support to the poor.
ľ¹ÏÓ°Ôº publishes the poverty rates for all three international poverty lines for all countries, not just the countries in the relevant income class grouping. Poverty statistics for all three international poverty lines are relevant for Indonesia, but because the country only recently became a UMIC, special attention is due to the lower and upper middle-income poverty lines. Upon graduating to the UMIC class in 2023, Indonesia left the top end of the national income range among LMIC countries and entered the bottom of the UMIC range. In their national policies, UMIC countries tend to be more ambitious in what they consider to be the minimum standard of living, and thus a higher share of Indonesians would be classified as poor by the UMIC standard than by the LMIC one. The UMIC category itself is also much wider than that of the LMICs, including countries with Gross Domestic Income (GDI) per capita up to $14,005, nearly three times Indonesia¡¯s level of $4810 in 2023.
Frequently Asked Questions
Does this mean that previous poverty estimates published by the World Bank or national government are wrong?
Previous poverty lines and the resulting poverty rates remain valid, including those based on 2017 purchasing power parity (set at $2.15, $3.65, and $6.85) as well as those based on 2011 PPP (set at $1.9, $3.2, and $5.5). Statistics from the previous series continue to be published by the World Bank.
There are now so many poverty lines and rates, what is the true poverty rate in Indonesia?
There is no single definition of poverty that serves all purposes, and this is the reason for the differences in the lines and methods of calculation. For questions about national policy in Indonesia, the national poverty line and poverty statistics published by Badan Pusat Statistik (BPS) is most appropriate. The international poverty lines published by the World Bank are appropriate for global poverty monitoring and comparing Indonesia to other countries or a global standard.
Why does the Rupiah equivalent of the international poverty lines not match the market exchange rate between the Rupiah and the US dollar?
For the World Bank to apply the same poverty measurement standards to all countries, it must first account for differences in the cost-of-living between them. It does so by measuring differences in the amount of goods and services a unit of one country¡¯s currency can purchase in another country; this is possible thanks to a global effort by national statistical offices around the world called the International Comparisons Program (ICP). Converting international poverty lines into their rupiah equivalent is thus not a market exchange rate conversion¡ªit requires an adjustment for cost differences between Indonesia and the rest of the world. The international poverty lines are currently benchmarked using the 2021 purchasing power parity produced by the ICP. This process of accounting for country-level differences in purchasing power also sets the World Bank¡¯s statistics apart from national definitions, because these adjustments are not necessary for monitoring poverty within a single country.
Does the World Bank use different data or methods from the Indonesian government to measure poverty?
ľ¹ÏÓ°Ôº uses the official household survey, SUSENAS, to measure poverty at the international poverty lines, the same source of data used by the Indonesian government for its national poverty statistics. However, the methods for measuring poverty differ. Poverty measured according to the World Bank¡¯s approach using the international poverty lines adjusts for three types of price differences: price differences over time (using the consumer price index), price differences between districts (Kabupaten/Kota, using a measure of the local cost of living), and price differences between countries (using PPP-related adjustments). The national definition of poverty does not use the CPI to adjust for price differences over time. The approach to accounting for spatial differences within Indonesia is also different¡ªthe official approach produces separate poverty lines for each rural and urban area within each province. Finally, because the official poverty line is intended for use in Indonesia alone, it does not require PPP related adjustments.
Why does the World Bank report that poverty in Indonesia has increased¡ªfor example, from 15.6 to 19.9 percent at the LMIC line and 60.3 to 68.3 percent at the UMIC line?
Poverty in Indonesia has not increased. The poverty rates reported at the new LMIC and UMIC lines are higher because the thresholds for being considered non-poor have increased at the global level. In low-income countries, this is mainly because the quality of available surveys has improved and several countries that have adjusted their poverty lines to take advantage of more accurate data. In middle-income countries, increasing national poverty lines suggest many have become more ambitious in defining their minimum acceptable standard of living. As a result of the higher thresholds, most countries see increase in their international poverty rates, as does Indonesia.
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1) The $1-a-day line, introduced in 1990, for global poverty monitoring, was revised to $1.25 per day (2005 purchasing power parity), $1.90 (2011 PPP), and $2.15 (2017 PPP). The current update, using 2021 PPPs, sets it at $3.00 per day. In 2017, the lower middle income and upper middle income poverty lines were also introduced to provide more relevant thresholds for countries at higher income levels.
