Indonesia Gets $200 Million for Further Reforms to Spur Growth, Cut Poverty

Asian Development Bank, 8 December 2009

MANILA, PHILIPPINES - Indonesia will receive a $200 million loan from the Asian Development Bank (ADB) for further reforms that support the government’s ongoing efforts to spur sustainable growth and cut poverty.

The ADB Board of Directors today approved the single-tranche loan for the Fifth Development Policy Support Program. The program provides cofinance for the development policy loans aimed at helping the government strengthen the investment environment, and improve public financial management and the delivery of services to the poor.

Indonesia has carried out wide ranging economic reforms since emerging from the 1997-1998 Asian financial crisis, and more recently has taken swift and decisive steps to address the threats posed by the global financial crisis. There have been broad improvements in the investment environment, governance and other key areas, but significant challenges remain. To continue the reform process, the government has sought financial assistance from development partners.

“The primary rationale of this fifth support program is to reinforce the government’s efforts to improve competitiveness, to boost public financial management and governance and to contribute to poverty reduction and improved public service delivery to the poor,” said Sharad Bhandari, Senior Country Specialist in ADB’s Indonesia Resident Mission.

It is also designed to harmonize policy reform work with key development partners - including World Bank and Government of Japan, who are supporting the development policy loans - in order to improve the effectiveness of aid delivery.

The fifth program encompasses reforms focused on strengthening the regulatory environment for investors, reducing the cost of regulatory compliance, improving the government’s budget process and management of public funds, and fine tuning poverty alleviation programs to make sure they reach the neediest. The program loan complements a broad range of ADB assistance to Indonesia, including a $1 billion equivalent Public Expenditure Support Facility Program loan and a countercyclical support loan of $500 million to help the government counter the impacts of the global economic crisis.

The loan, from ADB’s ordinary capital resources, has a 15-year term with a grace period of three years and an interest rate determined in accordance with ADB’s LIBOR-based lending facility. The Coordinating Ministry for Economic Affairs is executing agency for the program.

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