## session-1-2-sri-mulyani-indrawati

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---

### MACRO FISCAL POLICY to Support Inclusive and Sustainable Economic Growth — Recent economic and global context
- Covid-19 created a multidimensional crisis: health, social, economic, and financial.
- Global economic growth:
  - 2020: contracted by 3.0%
  - 2021: rebounded by 6.2%
- Key shocks and trends:
  - Recovery and supply disruptions pushed up commodity prices and inflationary pressures.
  - Monetary tightening began; the war in Ukraine caused stronger inflationary pressures → more aggressive monetary policy tightening → volatile and tight global financial sector and liquidity.
  - Food and energy insecurity; the impact of China Zero-Covid policy.
  - Vaccines were a game changer.
- Outlook and risks:
  - Lingering impact of aggressive monetary policy tightening in 2022 will affect economic activity in 2023 (some countries will experience a technical recession).
  - Inflation is past its peak. Monetary tightening is slowing, but interest rates are still high.
  - China's reopening is expected to drive global growth; Asia (ASEAN and India) remains the global growth epicentrum.
  - Growth rebound expected in 2024; uncertainty remains high.
  - Upside risks: commodity prices moderate but remain volatile; China reopening; strengthening Asia recovery; potential new growth drivers (digital, green economy).
  - Downside risks: geopolitical tension uncertainty; interest rates remain relatively high; China property sector pressure; narrow fiscal policy space; potential impacts of climate change (extreme weather).

### Pressures on fiscal and monetary policy (selected indicators)
- Government Debt Ratio in 2022 (% of GDP) — cross-country comparisons shown in source charts (country labels preserved in source).
- Policy Rate (%) and Changes in Policy Rates (basis points) — large cross-country variability illustrated in source charts.
- Global context series preserved in source charts:
  - Global Growth series: avg 2010-2019 (pre pandemi); 2020: -3.0; 2021: 6.2; 2022e and 2023f/2024f shown per IMF, WB, OECD datasets.
  - Global Inflation % yoy, average: charts show decline through 2023-2024.
- External sector dynamics (quarterly charts):
  - Current Account (Billion USD) and Current Account to GDP (%, rhs) plotted for 2019–2022.
  - Indonesia: Trade Balance Surplus: 32 months in a row.
  - Export (Billion USD) and Export Growth (% yoy) series illustrated for 2017–2022.

### Indonesia: recent macro performance and resilience
- Economic recovery strengthened; inflation relatively modest; external resilience maintained.
- Annual Economic Growth Outlook (%, yoy) — forecasts:
  - IMF (WEO Jan 2023): 2022 = 5.3, 2023 = 4.8
  - World Bank (GEP Jan 2023): 2022 = 5.2, 2023 = 4.8
  - ADB (ADO Update Sept 2022): 2022 = 5.4, 2023 = 5.0
  - Bloomberg Consensus (Nov 2022): 2022 = 5.3, 2023 = 4.9
  - OECD (Nov 2022): 2022 = 5.3, 2023 = 4.7
- Supporting domestic recovery:
  - Manageable pandemic situation and gradual easing of social restrictions.
  - Banking liquidity relatively ample to support consumption and investment.
  - Continued coordination among government and institutions to maintain domestic economic stability.
- Growth expectation statement: "GROWTH IS EXPECTED TO REMAIN STRONG IN 2023" with caution about global uncertainties.

### Fiscal response and consolidation — 2022 budget performance and drivers
- Fiscal stance: responsive and flexible to handle the pandemic, accelerate recovery, and support reforms.
- Key 2022 results:
  - Fiscal deficit recorded at 2.38% of GDP in 2022.
  - Government revenues: 115.9% of target; growth 30.6%.
  - Government expenditures: 99.5% of target; growth 10.9%.
  - More efficient budget financing and a return to pre-pandemic primary balance levels.
- Selected fiscal account figures (IDR Trillion where series indicate):
  - A. Revenue:
    - 2019 Audited 1,960.6; 2020 Audited 1,647.8; 2021 Audited 2,011.3; 2022 Revised Budget 2,266.2; 2022 Realization (Preliminary) 2,626.4; % to Revised Budget 115.9; Growth 30.6.
  - I. Tax Revenue:
    - 2019 1,546.1; 2020 1,285.1; 2021 1,547.8; 2022 Revised 1,784.0; 2022 Realization 2,034.5; % to Revised 114.0; Growth 31.4.
  - II. Non-Tax Revenue:
    - 2019 409.0; 2020 343.8; 2021 458.5; 2022 Revised 481.6; 2022 Realization 588.3; % to Revised 122.2; Growth 28.3.
  - B. Expenditure:
    - 2019 2,309.3; 2020 2,595.5; 2021 2,786.4; 2022 Revised 2,714.2; 2022 Realization 3,106.4; % to Revised 99.5; Growth 10.9.
  - Financing:
    - 2019 402.1; 2020 1,193.2; 2021 871.7; 2022 Revised 868.0; 2022 Realization 840.2; Financing 583.5 (table context shows % change 69.5, -33.1).
- Revenue composition and drivers in 2022:
  - Tax, Customs & Excise, VAT & Luxury Sales Tax, Import & Export Duties, Corporate Income Tax, Article 21 & 25/29 Personal Income Tax contributions shown in source charts.
  - Non-tax revenue supported by rising commodity prices, BUMN dividends, and service-based non-tax revenue.
  - Commodity price examples: ICP: $98.9 and HBA: $276.6 during recovery; earlier COVID-19 and recovery ICP: $40.4; HBA: $58.2.
- 2023 budget design and assumptions:
  - Economic Growth: 5.3%
  - Inflation: 3.6%
  - Exchange Rate: IDR 14,800/USD
  - 10Y T-Bonds Rate: 7.9%
  - Gas Lifting: 1,100 Thousand bpd
  - Oil Lifting: 660 Thousand bpd
  - ICP assumption: 90 USD/Barrel

### Long-term development agenda and economic transformation
- Vision: Advanced Indonesia by 2045 — accelerate economic transformation for high, inclusive and sustainable growth.
- Short-term targets (2022–2024) and selected indicators:
  - Economic Growth: 2022 = 5.3; 2023 = 5.0 – 5.3; 2024 = 5.2 – 5.7
  - Investment Growth: 2022 = 3.9; 2023 = 4.1 - 4.7; 2024 = 5.1 - 5.7
  - Inflation: 2022 = 5.5; 2023 = 3 ± 1; 2024 = 2.5 ± 1
  - Unemployment: 2022 = 5.9; 2023 = 5.3 – 6.0; 2024 = 5.2 – 5.9
  - Poverty: 2022 = 9.5; 2023 = 7.5 – 8.5; 2024 = 7.4 – 8.4
  - Extreme Poverty: 2022 = 2.0; 2023 = 1.0 – 2.0; 2024 = 0.0
  - Stunting: 2022 = 21.6; 2023 = 17.5; 2024 = 14.0
- Economic growth targets by multi-year period (average %, yoy):
  - 2023-24: 5.5
  - 2025-29: 5.9
  - 2030-39: 6.9
  - 2040-44: 5.1
- Structural transformation priorities:
  - Digital economy adoption surge; young tech-savvy demographic potential.
  - Downstreaming natural resources (nickel, tin, bauxite); development of downstream metal mineral industries (copper, bauxite, tin, nickel refineries).
  - Green economy development and new renewable energy transition commitment.
  - Recovery of global tourism.
  - Medium term export share target: Medium & Hi-tech Industry >40%.
- Industrial revitalization objectives and instruments:
  - Manufacturing sector growth >6%; unemployment rate < 5.5%.
  - Measures: directed competitiveness (HR, infrastructure, logistics, legal); technology transfer; strengthening R&D; credit guarantee for Small and Medium Industries and strategic sectors; KSSK integrated policy mix; creative financing (startup and venture capital); strengthening independence of pharmacy sector; development of battery, machinery and electronics industry.
  - 2023 investment target: IDR 1,294.1 T* (PMA 51.1% ~ 661.3 T). (*Investment Target in Indonesia Medium Term Planning of 2020-2024)
- Infrastructure and digitalization:
  - Connectivity, energy, and food infrastructure consolidation.
  - Industrial area development for agglomeration and clustering.
  - Equitable digital infrastructure to all regions.
  - Mainstream Green Economy Agenda in physical capital.
  - Financing optimization: PPP scheme, private sector empowerment, SOE’s task, Public Service Agency (BLU), SMV, and SWF.
  - BTS 4G development in remote and disadvantaged villages: 2020 = 1,679 BTS → 2023 = 9,583 BTS.
  - Global Infrastructure ranking: Indonesia ranked 52nd out of 63 countries (Global Infrastructure ranking 2022).

### Policy implications and priorities — fiscal and structural
- Short- to medium-term fiscal priorities:
  - Continue prudent and conservative budgeting to navigate external volatility and potential higher debt costs.
  - Preserve citizens' purchasing power through energy subsidies and compensation programs while enhancing productivity.
  - Maintain fiscal consolidation momentum aiming to return deficit to a maximum of 3% of GDP.
  - Optimize budget financing and improve efficiency in budget execution.
- Structural and transformational priorities:
  - Accelerate downstream industry development and attract investment to increase medium & hi-tech exports (>40% target).
  - Strengthen financial intermediation and use creative financing for startups and venture capital.
  - Promote technology transfer, R&D, and skills development to support manufacturing growth >6% and reduce unemployment below 5.5%.
  - Scale up infrastructure (connectivity, energy, food), digital inclusion, and green economy mainstreaming.
  - Leverage public-private partnerships, SOE roles, BLU, and potential SWF mechanisms for financing.

### Attribution
*Sri Mulyani Indrawati, Minister of Finance, Republic of Indonesia — Tokyo, 14 February 2023*

### Section 1

### MACRO FISCAL POLICY to Support Inclusive and Sustainable Economic Growth

### Recent economic and global context
- The Covid-19 pandemic created a multidimensional crisis: health, social, economic, and financial.
- Global economic growth contracted by 3.0% (The worst since the Great Depression 1929-2939).
- Global growth rebounded by 6.2% in 2021, but recovery was patchy.
- Key recent global shocks and trends:
  - Recovery and supply disruptions pushed up commodity prices and inflationary pressures.
  - Monetary tightening began; the war in Ukraine caused stronger inflationary pressures → more aggressive monetary policy tightening → volatile and tight global financial sector and liquidity.
  - Food and energy insecurity; the impact of China Zero-Covid policy.
  - Overall weakening of global growth prospects, but vaccines were a game changer.
- Outlook and risks:
  - The lingering impact of aggressive monetary policy tightening in 2022 will affect economic activity in 2023 (some countries will experience a technical recession), but overall not as bad as previously predicted.
  - Inflation is past its peak. Monetary tightening is slowing, but interest rates are still high.
  - China's reopening is expected to drive global growth; Asia (ASEAN and India) remains the global growth epicentrum.
  - A growth rebound is expected in 2024, but uncertainty is still high.
  - Upside risks: commodity prices moderate but remain volatile; China reopening; strengthening Asia recovery; potential new growth drivers (digital, green economy).
  - Downside risks: geopolitical tension uncertainty; interest rates remain relatively high; China property sector pressure; narrow fiscal policy space; potential impacts of climate change (extreme weather).

### Pressures on fiscal and monetary policy (selected indicators)
- Government Debt Ratio in 2022 (% of GDP) — country comparisons shown (examples preserved as labels): INDUSAGBRCHNBRAJPNITAZAFFRAAUSCANPHLTHAMALIDNMEXDEUSAUSGPRUSKOR (values shown in charts).
- Policy Rate (%) — series illustrated for many countries (values shown in charts).
- Changes in Policy Rates (basis points) — large cross-country variability illustrated (values shown in charts).
- Global growth and inflation context:
  - Global Growth series: avg 2010-2019 (pre pandemi); 2020: -3.0; 2021: 6.2; 2022e and 2023f/2024f shown per IMF, WB, OECD datasets (charts).
  - Global Inflation % yoy, average: charts show decline through 2023-2024.
- External sector dynamics (quarterly charts):
  - Current Account (Billion USD) and Current Account to GDP (%, rhs) plotted for 2019–2022.
  - Trade Balance Surplus: 32 months in a row (Indonesia).
  - Export (Billion USD) and Export Growth (% yoy) series: historical values illustrated (2017–2022).

### Indonesia: recent macro performance and resilience
- Economic recovery continued to strengthen; inflation is relatively modest; external resilience maintained.
- Annual Economic Growth Outlook (%, yoy) — various forecasts for 2022–2023:
  - IMF (WEO Jan 2023): 2022 = 5.3, 2023 = 4.8
  - World Bank (GEP Jan 2023): 2022 = 5.2, 2023 = 4.8
  - ADB (ADO Update Sept 2022): 2022 = 5.4, 2023 = 5.0
  - Bloomberg Consensus (Nov 2022): 2022 = 5.3, 2023 = 4.9
  - OECD (Nov 2022): 2022 = 5.3, 2023 = 4.7
- Supporting domestic recovery factors:
  - Manageable pandemic situation and gradual easing of social restrictions.
  - Banking liquidity relatively ample to support consumption and investment.
  - Continued coordination among government and institutions to maintain domestic economic stability.
- Growth expectation: "GROWTH IS EXPECTED TO REMAIN STRONG IN 2023" with caution about global uncertainties.

### Fiscal response and consolidation
- Fiscal policy remained responsive and flexible to handle the pandemic, accelerate recovery, and support reforms.
- Budget performance highlights:
  - Fiscal deficit recorded at 2.38% of GDP in 2022 — faster fiscal consolidation and a return to pre-pandemic levels.
  - Government revenues booked 115.9% from its target, grew by 30.6%, supported by strengthened economic activity, the impact of the tax reform (HPP law), and high commodity prices.
  - Government expenditures at 99.5% from its target, directed to social assistance & subsidies, national strategic projects, and economic recovery programs (central government expenditure and Transfers to Regions).
  - The deficit and Primary Balance fell significantly to pre-pandemic levels, accompanied by more efficient budget financing.
- Fiscal history snapshots (selected figures from accounts):
  - A. Revenue: 2019 Audited 1,960.6; 2020 Audited 1,647.8; 2021 Audited 2,011.3; 2022 Revised Budget 2,266.2; 2022 Realization (Preliminary) 2,626.4; % to Revised Budget 115.9; Growth 30.6.
  - I. Tax Revenue: 2019 1,546.1; 2020 1,285.1; 2021 1,547.8; 2022 Revised 1,784.0; 2022 Realization 2,034.5; % to Revised 114.0; Growth 31.4.
  - II. Non-Tax Revenue: 2019 409.0; 2020 343.8; 2021 458.5; 2022 Revised 481.6; 2022 Realization 588.3; % to Revised 122.2; Growth 28.3.
  - B. Expenditure: 2019 2,309.3; 2020 2,595.5; 2021 2,786.4; 2022 Revised 2,714.2; 2022 Realization 3,106.4; % to Revised 99.5; Growth 10.9.
  - C. Primary Balance and D. Surplus (Deficit) series shown with values and % to GDP: 2022 deficit (preliminary) 2.38% of GDP.
  - E. Financing: 2019 402.1; 2020 1,193.2; 2021 871.7; 2022 Revised 868.0; 2022 Realization 840.2; Financing 583.5; % change noted (69.5, -33.1 in table context).
- State expenditure escalation during COVID-19 primarily for health handling and economic recovery.
- Revenue composition and drivers in 2022:
  - Tax revenue realization (IDR Trillion) components: Tax, Customs & Excise, VAT & Luxury Sales Tax, Import & Export Duties, Corporate Income Tax, Article 21 & 25/29 Personal Income Tax (charts with exact series values provided).
  - Non-tax revenue realization reached the highest since 2019, supported by rising commodity prices, BUMN dividends, and service-based non-tax revenue.
  - Commodity price examples: ICP: $98.9 and HBA: $276.6 during recovery; earlier COVID-19 and recovery ICP: $40.4; HBA: $58.2.
- 2023 budget design and assumptions:
  - Economic Growth: 5.3%
  - Inflation: 3.6%
  - Exchange Rate: IDR 14,800/USD
  - 10Y T-Bonds Rate: 7.9%
  - Gas Lifting: 1,100 Thousand bpd
  - Oil Lifting: 660 Thousand bpd
  - ICP assumption: 90 USD/Barrel
  - Note: 2022 Budget Realization growth percentages indicated in table footnotes.

### Long-term development agenda and economic transformation
- Vision: Advanced Indonesia by 2045 — accelerating economic transformation to achieve high, inclusive and sustainable growth.
- Short-term targets (2022–2024) and selected indicators:
  - Economic Growth: 2022 = 5.3; 2023 = 5.0 – 5.3; 2024 = 5.2 – 5.7
  - Investment Growth: 2022 = 3.9; 2023 = 4.1 - 4.7; 2024 = 5.1 - 5.7
  - Inflation: 2022 = 5.5; 2023 = 3 ± 1; 2024 = 2.5 ± 1
  - Unemployment: 2022 = 5.9; 2023 = 5.3 – 6.0; 2024 = 5.2 – 5.9
  - Poverty: 2022 = 9.5; 2023 = 7.5 – 8.5; 2024 = 7.4 – 8.4
  - Extreme Poverty: 2022 = 2.0; 2023 = 1.0 – 2.0; 2024 = 0.0
  - Stunting: 2022 = 21.6; 2023 = 17.5; 2024 = 14.0
- Economic growth targets by period (average %, yoy):
  - 2023-24: 5.5
  - 2025-29: 5.9
  - 2030-39: 6.9
  - 2040-44: 5.1
- Structural transformation priorities and sectoral strengths:
  - Digital economy adoption surge; potential from a young tech-savvy demographic.
  - Downstreaming of natural resources (nickel, tin, bauxite) and development of downstream metal mineral industries (copper, bauxite, tin, nickel refineries).
  - Green economy development and new renewable energy transition commitment — high carbon value potential.
  - Recovery of global tourism; Indonesian tourism considered one of favorite destinations.
  - Target medium term export share: Medium & Hi-tech Industry >40%.
- Industrial revitalization strategy to make manufacturing the engine of sustainable and inclusive growth:
  - Goals: manufacture sector growth >6%; massive and inclusive job creation (unemployment rate < 5.5%).
  - Policies and measures include: directed competitiveness (HR, infrastructure, logistics, legal); technology transfer; strengthening R&D; credit guarantee for Small and Medium Industries and strategic sectors; KSSK integrated policy mix; creative financing (startup and venture capital); strengthening independence of pharmacy sector; development of battery, machinery and electronics industry.
  - 2023 investment target: IDR 1,294.1 T* (PMA 51.1% ~ 661.3 T). (*Investment Target in Indonesia Medium Term Planning of 2020-2024)
- Infrastructure and digitalization for transformation:
  - Consolidation of productive infrastructure: connectivity, energy, and food.
  - Industrial area development for agglomeration and clustering.
  - Equitable digital infrastructure to all regions, including remote areas.
  - Mainstreaming the Green Economy Agenda in building physical capital.
  - Financing optimization: PPP scheme, private sector empowerment, SOE’s task, Public Service Agency (BLU), SMV, and SWF.
  - BTS 4G development in remote and disadvantaged villages: 2020 = 1,679 BTS ➔ 2023 = 9,583 BTS.
  - Global Infrastructure ranking: Indonesia is ranked 52nd out of 63 countries (Global Infrastructure ranking 2022).

### Policy implications and priorities
- Short- to medium-term fiscal priorities:
  - Continue prudent and conservative budgeting to navigate external volatility and potential higher debt costs.
  - Preserve citizens' purchasing power through energy subsidies and compensation programs while enhancing productivity.
  - Maintain fiscal consolidation momentum aiming to return deficit to a maximum of 3% of GDP.
  - Optimize budget financing and improve efficiency in budget execution.
- Structural and transformational priorities:
  - Accelerate downstream industry development and attract investment to increase medium & hi-tech exports (>40% target).
  - Strengthen financial intermediation and use creative financing for startups and venture capital.
  - Promote technology transfer, R&D, and skills development to support manufacturing growth >6% and reduce unemployment below 5.5%.
  - Scale up infrastructure (connectivity, energy, food), digital inclusion, and green economy mainstreaming.
  - Leverage public-private partnerships, SOE roles, BLU, and potential SWF mechanisms for financing.

*Sri Mulyani Indrawati, Minister of Finance, Republic of Indonesia — Tokyo, 14 February 2023*

### Section 2

### session-1-2-sri-mulyani-indrawati - Section 2

### Human capital, education, health, and social protection
- Sub-infrastructure ranking (2021 → 2022): Basic Infrastruktur 32 → 49; Technological Infrastructure 51 → 59; Scientific Infrastructure 58 → 32 (as presented in the matrix).
- Digital Competitiveness Index: 32.1 (2021), 35.2 (2022).
- Stunting:
  - Target: 5%
  - "The stunting prevalence rate (%) is still far from the target" (Source: Ministry of Health).
- Extreme poverty reduction trajectory:
  - "The target trajectory for reducing extreme poverty is still far from the target" (Source: Statistics Indonesia).
- Current policies and future directions:
  - Strengthening Social Protection.
  - Education Policy: focus on higher and vocational education; Link and Match Program; LPDP.
  - Health Policy: sustainable national health care system; PIP; National Health Insurance.
  - National Strategy for Stunting Prevention.
  - Database Improvement (socio-economy registry).
- Human development indices:
  - 114 th from 191 countries HUMAN DEVELOPMENT INDEX (HDI) RANKINGS 2021.
  - 96thfrom 174 countries HUMAN CAPITAL INDEX (HCI) RANKINGS 2020.
  - Conclusion: "Indonesia's HDI and HCI ratings are still relatively low."
- Priority spending trends (IDRtn, 2013–2023 series shown): Education, Health, Social Protection, Infrastructure (figures displayed in source charts).

### Education and labor market
- Average Years of School (2021): Men 8.92, Women 8.17 (Source: BPS, Feb 2022, calculated).
- Proportion of Employment by gender and education (2022): labor market dominated by men at almost every education level except Diploma and University.
- Education policy priorities:
  - Strengthen higher and vocational education.
  - Expand access to scholarships and research: 32,842 scholarship awardees; 52.4% are women; >1,668 research projects.

### Gender gap and social inclusion
- Women's contribution and outcomes (2021 unless stated):
  - Women's Income Contribution: 37.22% vs 62.78% for men.
  - Per Capita Expenditure: IDR9 mn vs IDR15.8 mn for men.
  - Women's representation in the legislature in 2019: DPR 20.5%, DPD 30.9%.
  - Number of Health Complaints (2021): 28.3% vs 26.15% for men.
  - Maternal Mortality Rate (2020): 305 per 100.000 live births vs 140 of SDGs 2030.
  - Internet access (2019): 44.86% vs 50.50% for men.
- Government actions: "THE GOVERNMENT HAS STEPPED UP TO PROMOTE GENDER EQUALITY to support women’s health and education and provide necessary condition for women to thrive."
- Social programs with strong female participation:
  - Program Keluarga Harapan (PKH): Up to last year, approximately 11.1 million women enrolled in the program.
  - Assistance for Micro Enterprises (BPUM): Provided funding to more than 5.38 million SMEs; 95% of them are women.
  - Providing capital support for 12,8 million SMEs, in which 70% are managed by women.

### Family planning and endowment funds
- Family planning program outcomes: contraception use increased from non-existent to more than 60 percent within four decades.
- Accumulated Endowment Fund (USD Billion) 2016–2022 (values shown in chart): 1,5; 2,3; 3,2; 3,6; 4,8; 6,9; 7,1.
- Allocation (US$ Billion) 2013–2022 (series shown in source charts; labeled 0,30,40,50,70,91,22,52,62,02,0 and 2,33; 2,87; 3,51; 5,98; 6; 10 10 10 10 10).

### Climate change agenda, NDCs, and adaptation/mitigation targets
- Indonesian emission reduction framing:
  - Paris Agreement and NDC 2030 Target: 31,89 % national effort; 43,20 % with international support.
  - CM1 = Counter Measure 1 (unconditional mitigation scenario); CM2 = Counter Measure 2 (conditional mitigation scenario).
- Emission reduction target by sector and scenarios (values shown in source charts):
  - Example aggregate numbers presented: 358, 9, 500, 729446, 40, 43.5, 10, 12, 7, 43.2%, 31.89% (CM2/CM1/NDC/Enhanced NDC matrices in source).
  - Alternate scenario numbers presented: 314, 3.25, 497, 692446, 11, 40, 9, 4, 3, 41%, 29% (CM2/CM1 comparisons in source).
- Long-Term Strategy for Low Carbon and Climate Resilience (LTS-LCCR) 2050; Toward Net Zero Emission 2060 or sooner.
- LCCP scenario highlights:
  - Peak emission 5 sector in 2030 = 540 MtonCO2e.
  - Forestry Net-Sink FOLU in 2030.
  - Energy Net-Sink in 2037.
  - Net Zero Emission in 2060 or sooner.
- Climate finance strategy: funding to come from public, private, and international sectors toward "a just and affordable transition."
- Sources of financing enumerated: domestic State Budget, NON-State Budget, SOEs, Carbon Trade, Regional Budget (APBD), Financial Sector (Banks and Non-Banks), Capital Market, BLU/Public Service Agency, Philanthropy, Govt. Spending, Fiscal Transfer, Carbon Tax/Levy, Green Finance (Green Sukuk, SDGs Bond), Green Climate Fund, Global Environment Facility, Adaptation Fund, MDBs/IFIs, BPDLH, SDG INDONESIA ONE, ICCTF.

### Energy Transition Mechanism (ETM) and country platform
- ETM country platform design:
  - Facilities: Carbon Reduction Fund (CRF), Clean Energy Fund (CEF).
  - Sources of funds: Blended Finance; Commercial/INA; Direct to projects (DPL, Sustainability Linked Loan, Support for Asset Spin-Off, etc); PMN; Low-cost Loan; Guarantee; Social-Economical Impact; Carbon Credit.
  - Governance: Country Platform Manager; Advisory Board; Coordinating Ministers; Steering Board (MOF, MEMR, MSOE, MOEF Member); Echelon 1 from relevant ministries; SC Secretariat; Steering Committee.
  - Flow highlights: Incoming blended finance to the CP through PT SMI; CP executes early retirement processes according to a roadmap; Mobilizing CEF funds to transform coal-fired power plants to renewables by considering electricity supply business plan (RUPTL); ETM produces carbon kredit for carbon trading; The ETM's carbon credit traded in the carbon market; Revenue cycle from the ETM comes in and is managed via PNBP.
- Coal Phaseout and project financing instruments shown in source: Low-cost Refinancing; Technical Assistance; Commercial Loan; Equity; De-risking; DJPPR; PT PII; RE Project I–III.
- Carbon market mechanism instruments: Carbon Trading, Carbon Bond, RBP, Stand By Buyer, Sustainability Linked Bond/Loan; Revenue Recycling.

### Fiscal policy, structural reforms, and investment financing
- Fiscal policy objective: "Accelerating Economic Transformation to Achieve High, Inclusive, and Sustainable Growth."
- Short-term priorities: Controlling Inflation; Boosting Investment; Ending Extreme Poverty; Reducing Stunting; Natural Resources Value Added Enhancement; Strengthening Deregulation and Institutions.
- Medium-term priorities: Human Resource Quality improvement; Infrastructure Development.
- Productivity and economic structural goals: Productivity Low → High; Value Added Low → High; Economic Base Narrow → Broad-based and Inclusive; Environment Brown → clean and green.
- Structural reform instruments and fiscal measures:
  - Omnibus Law on Job Creation: OSS launched in 2021; Acceleration on National Strategic Project (PSN) implementation; Climate Change Fiscal Framework (CCFF) and Energy Transition Mechanism; Risk-Based Business Analysis to Encourage FDI; Positive investment list; Establishment of Sovereign Wealth Fund (INA).
  - Omnibus Law on Financial Sector Development and Fiscal Reform: Tax Reform; Law on Intergovernmental Transfer; redesign transfers-to-regions; harmonize central and local government spending; strengthen local taxing power.
  - Voluntary Disclosure Program (January - June 2022) noted as successful.
  - VAT rate increase to 11% since April 1st (year indicated in source).
  - Integration of ID number and taxpayer number; anticipated changes: strengthening excise mechanism; income tax policy change; introduction of carbon tax.
- Financial sector reform goals: Improving access to financial services; Promoting long-term sources of finance for development; Increasing competitiveness and efficiency; Developing instruments and strengthening Risk Mitigation; Strengthening investor and consumer protection.
- Saving – Investment Gap observations:
  - Prior to 2021-2022 commodity boom: limited sources of investment financing → dissaving → current account deficit.
  - 2021-2022 commodity boom: ample liquidity → surplus in the current account balance; "The period of ample liquidity in 2021-2022 is rare."
  - P2SK Law expected to deepen domestic financial market so investment financing can be met from within the country.
- Identified challenge: "LIMITED DOMESTIC SOURCE OF FINANCING FOR DEVELOPMENT NEEDS TO BE ADDRESSED."

### Climate finance challenges and policy implications
- Future challenges listed:
  - Limited fiscal space; strengthening fiscal reform agenda and fiscal consolidation key to fiscal sustainability.
  - Optimal mobilization of non-state budget climate change funding sources.
  - Strengthen viability of green projects so they can be financed by the financial sector and receive international support.
  - Current market mechanism does not reflect price difference between Green and non-Green sectors; need to strengthen Greening the Finance.
  - Ensure economic recovery and transition to a green economy is Just and Affordable.
  - Modalities include B to B and G to G financing.

### Definitions and frameworks for transition finance
- Transition finance definitions and taxonomy highlights (as presented from multiple frameworks):
  - Transition finance: a financing pathway for eligible but non-taxonomy aligned activities to better align with Paris Agreement objective of 1.5°C and 2030–2050 decarbonization targets.
  - ASEAN Taxonomy: classifies activities into Green, Amber, and Red; transition finance enables activities to move to a higher colour classification.
  - G20 Sustainable Finance Report: financial services supporting whole-of-economy transition aligned with SDGs and Paris Agreement.
  - Transition finance extends beyond investment in low-carbon facilities and R&D to include costs of phasing out existing facilities.
  - Net-Zero Banking Alliance Transition Finance Guide (2022) criteria highlighted: economic activities should (1) displace more carbon-intensive options with documented/independently verified GHG reductions, and (2) enable wider application or integration of less carbon-intensive options.

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_Source: https://www.imf.org/-/media/files/oap/oap-home/2023/session-1-2-sri-mulyani-indrawati.pdf_