Poverty and undernutrition in Indonesia during the 1980s

Indonesia adjusted rapidly to sharply falling external terms of trade during the 1980's - using a classic package of currency devaluation, budgetary and monetary restraint, and regulatory relaxation. This paper discusses how the country fared in its efforts to alleviate poverty and undernutrition during that period. The paper studies a wide range of possible poverty lines and poverty measures - and the sensitivity of key results to many of the underlying assumptions about poverty. Although caloric intake data are not ideal, the authors found evidence that the extent of undernutrition also fell significantly. For a caloric intake level which 37 percent of the population failed to attain in 1984, only 27 percent of the population failed to attain it in 1987. Why was this so? Gains to the rural sector contributed greatly to the alleviation of poverty. Gains to the urban sector and population shifts were quantitively less important than direct gains to the rural poor. Increases in average real consumption and an improvement in overall equity both helped to reduce poverty. In addition, Indonesia's recent economic history had created conditions favorable to alleviating poverty so long as modest growth in private consumption per capita could be maintained during the adjustment period.