The World Bank has introduced a new global poverty threshold for upper-middle-income countries (UMICs), classifying Indonesians earning below US$8.30 (about Rp135,000) per day in 2021 PPP per month as poor and therefore suggesting 68.3 percent of the country’s population falls under the poverty line.

This recalibration stems from the World Bank’s global effort to align poverty definitions with evolving living standards and cost structures. Unlike exchange-rate-based conversions, the institution employs a Purchasing Power Parity (PPP) model an approach that adjusts for the relative cost of living and inflation rates across countries.

Indonesia, which officially entered UMIC status in 2023 with a Gross National Income (GNI) per capita of US$4,810, now finds its poverty assessment benchmarked against other UMIC peers. This reclassification is not driven by worsening economic conditions, but rather by a global update on what constitutes a basic standard of living.

“Many countries are raising their poverty thresholds in response to rising minimum living standards globally,” the World Bank noted in its June 13 report, The World Bank’s Updated Global Poverty Lines: Indonesia.

Discrepancy with national data

Despite the World Bank’s findings, Indonesia’s official poverty rate remains far lower. According to Statistics Indonesia (BPS), as of September 2024, only 8.57 percent of the population is classified as poor under the national poverty line.

The divergence arises from fundamental differences in methodology. While both the World Bank and BPS use data from the National Socioeconomic Survey (SUSENAS), the processing varies.

The World Bank accounts for time-based price changes using the Consumer Price Index (CPI), regional price disparities, and international comparisons through PPP. In contrast, BPS does not adjust for CPI and bases its poverty line on local urban-rural differences without cross-country benchmarking.

“The national poverty line remains the most relevant for domestic policy, such as social assistance distribution. The international line is intended for global comparisons,” the World Bank stated.

Methodological overhaul

Experts argue that Indonesia's official poverty measurement may be outdated. Director of the Center of Economic and Law Studies (Celios), Bhima Yudhistira, criticized BPS for maintaining a methodology that has remained largely unchanged since 1976.

“The BPS approach is outdated. Meanwhile, the World Bank updates its methodology regularly to reflect dynamic changes in consumption and cost of living,” Bhima spoke to Indonesia Business Post on Monday, June 16, 2025.

He cited Malaysia as a case study in 2019, the country revised its poverty line, resulting in a more accurate identification of vulnerable populations and allowing for expanded social assistance coverage.

“We shouldn't fear higher poverty numbers. In fact, updated data can help us design better-targeted policies and reduce poverty more effectively,” he added.

Bhima urged BPS to collaborate with independent academics and international organizations to revise the national poverty line. He warned that underreporting the poor could result in inadequate distribution of aid, missing those who are truly in need.

Using the World Bank’s lower-middle-income benchmark of US$4.20 per day (Rp765,000/month), 19.9 percent of Indonesians would be classified as poor. The rate drops to 5.4 percent when measured against the extreme poverty threshold of US$$3 per day (Rp546,000/month).

“Concerned that the number of poor people who are understated risks causing social assistance not to cover the population who are actually categorized as poor,” Bhima concluded.