Guideline in Analyzing (Macro Framework of) Government Proposed Budget (RAPBN)

This guideline is being made to ensure that the analysis made by BAC – DPR RI could be improve to folow
the standard benchmark of macro framework analysis of overal proposed state budget (RAPBN) as inputs
for the member of the house of representatives. Before we formulate the guideline several things need to
be highlighted:

1. The gap of analysis made by BAC – DPR RI and their counterpart of Ministry of Finance, Indonesian
Ministry of National Development Planning and Central Bank of Indonesia is large due to inequality
of resources (data, funding, personels, etc.)
2. The guideline is made to improve the work of the analysis to a certain extent and will not be close
enough to the standard benchmark.
3. Proper comprehensive analysis need support from large and updated macroeconomic database
and medium to large economic models to forecast many variables in the short- medium- and long-
run intervals.
4. The proposed method for analysing macro-framework of overall governmnet budget is Financial
Programming Policy (FPP) method that is widely used by IMF staff.
5. The constructed FPP Macro Framework of Indonesia is still basic and can be improved further in
the future. FPP training for macroeconomic researcher members of BAC – DPR RI is recommended.
6. Due to the gap of resources, a roadmap has been formulated (explain in other documents) in order
to improve by BAC – DPR RI Macroeconomic Framework analysis in level to the one produced by
Ministry of Finance, Indonesian Ministry of National Development Planning and Central Bank of
Indonesia

Guideline to Analyze Macro-Framework of Government Proposed Budget (RAPBN)

1. Analysis of basic Macroeconomic Assumptions:

a. Analysis of each macroeconomic indicators of economic growth, inflation, exchange rate,
3 month SPN interest rate, oil price, oil and gas lifting needs to carried out in detail
b. The value of each macroeconomic indicators need to be forecasted in the short-term and
if possible in medium and long-term (when proper economic models have been
constructed)
2. Analysis of the effect of proposed state budget macroeconomic consumption will be done using
FPP method by constructing Indonesia Macroeconomic Framework using linkage of Real Sector,
Monetary Sector, Government/Public Sector and External Sector. If some subsector need to be
forecasted, several simple forecasting method will be used (using elasticity, proportion, simple
regression, time series, etc.). Using the forecasting value, the macroeconomic assumption
proposed by the government can be analyze using (simple) FPP macroeconomic framework of
Indonesia by comparing the (baseline) forecast value and the proposed macroeconomic
assumptions.
3. BAC – DPR RI need to analyze each proposed state budget main economic (fiscal) policies and to
give inputs on the pro- and cons- of the proposed policies by the government. The analysis should
also include special policy debate (hot issues) that could be different in every budget cycle.
Relevant data need to be find, calculated and presented to analyze the proposed government
(fiscal) policies.
4. In the analysis, BAC – DPR RI need to analyze (using FPP and qualitative method ) at least:
a. Indonesia and World Current Economic Condition
b. Real Sector
c. Monetary Sector
d. External Sector
e. Public Sector
 f. Economic Vulnerability

If possible, when BAC- DPR RI has constructed some useful economic models, the analysis could
be enhance futher to include:

g. Fiscal Risk
h. Macro-stress test
i. Medium- and Long-term economic projection of Proposed State Budget

5. In analyzing the macro framework, the BAC – DPR RI need to analyze especially the consequences
of proposed government budget and its policy to Indonesia real sector, monetary sector, public
sector and external sector using the FPP method. The consistency of macroeconomic framework
also need to be analyzed properly.
7. The economic vulnerability and fiscal risk can be analyzed using (qualitative) risk assessment
matrix. This matrix can be also a result of meta-analysis of economic outlook analysis produced by
Ministry of Finance, Indonesian Ministry of National Development Planning and Central Bank of
Indonesia, international institution such as The World Bank, IMF, ADB, OECD, etc.
6. Economic vulnerability analysis could be improved with proper economic model for assessing
macro-fiscal stress test, sensitivity analysis, etc.
7. There are many reports of Indonesia economy (produced by Ministry of Finance, Indonesian
Ministry of National Development Planning and Central Bank of Indonesia, The World Bank, IMF,
ADB, OECD, etc. that are useful as an example.