Political divisions within the Indonesian cabinet and a lack of political support for agencies charged with implementing financial reforms are hampering changes in the financial sector, the World Bank said.

"The cabinet's difficulty in building an internal consensus and providing the political will to support the agencies tasked with financial sector reform reinforces concerns that differing political interests may hamper progress in the financial sector reform programme," it said in its macroeconomic update. It said while several steps such as the recapitalisation of Bank Mandiri and trading of bank recapitalisation bonds were encouraging, the challenges remain "daunting".