Strengthening The Role of Financial Sector To Promote Strong and Sustainable Growth

In order to achieve strong and sustainable economic growth through infrastructure development, huge investment financing is needed. However, to reach the target, state financing solely is not enough. Beside mandated to address higher and more sustainable revenue as well as better spending prioritization, Government of Indonesia has to maintain the budget deficit under 3 percent of Gross Domestic Product (GDP) and total outstanding debt to be less than 60 percent of GDP. Given this constraint, private investment both directly through financial institution and indirectly through financial market needs to be promoted. However, compared to other countries in the region, financial institutions and market in Indonesia still needs to be far improved. This working paper aims to form a macro strategy to increase role of financial sector in providing financing source for development, especially unconventional sources such as through capital market and non-bank institutional investors including insurances and pension funds.

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