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RI to get $1b ADB loan to help back the budget
The Asian Development Bank (ADB) has approved a US$1 billion loan for Indonesia that will help the country sustain its budget and cope with the global financial crisis
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The Asian Development Bank (ADB) has approved a US$1 billion loan for Indonesia that will help the country sustain its budget and cope with the global financial crisis.
ADB stated Thursday that the loan was part of a joint standby loan facility provided by the Australian government, the Japanese government and the World Bank, totaling up to $5.5 billion.
ADB provides $1 billion, Australia $1 billion, Japan $1.5 billion and the World Bank $2 billion.
“The global financial crisis has made it expensive for Indonesia to access international debt markets and trade finance, which could constrain spending on essential social services and poverty alleviation programs,” said Jaseem Ahmed, the director of ADB’s financial sector, public management and trade division for Southeast Asia.
With the ADB’s approval, now only Australia that has yet to give final approval to a standby loan.
Indonesia is the first country among ADB’s members to receive this type of standby loan, ADB said.
The single-tranche loan will have a 15-year term, including a 3-year grace period, with an interest rate set in accordance with ADB’s London Interbank Offered Rate (LIBOR)-based lending facility.
ADB said that Indonesia needs to support critical public expenditure for poverty alleviation, social protection and infrastructure maintenance amid the global financial crisis.
“This loan will enable the government to maintain public expenditure, and to respond more effectively to the poverty impacts of the financial crisis,” Ahmed said.
This is one of the largest single loans ADB has ever provided to Indonesia, and is expected to help plug this year’s budget deficit reaching Rp 139.5 trillion ($13.8 billion), equivalent to 2.5 percent of the gross domestic product (GDP).
The government had said it will access the standby loans only if market conditions remain tight and the draw down criteria “triggers” set out in the financing plan are met.
“We will use the standby loans, if not in 2009, [then] in 2010,” said the Finance Ministry’s head of fiscal policy Anggito Abimanyu, adding that next year Indonesia may still face problems, while recovery starts.
The ministry says the government expects to secure Rp 142.3 trillion in total financing this year, with Rp 44.5 trillion backup available from the standby loans.
The government plans to sell Rp 99.6 trillion of bonds this year and has already sold Rp 89 trillion so far, according to the Finance Ministry’s debt management office.
Anggito said that Indonesia will issue its first yen-denominated bonds later this year, with Japan, bearing in mind market conditions.
Australia is expected to provide its loan this month, he added.
Indonesia’s economy grew by 4.4 percent in the first quarter of 2009 from a year earlier, according to the Central Statistics Agency (BPS). The government expects a full-year growth of between 4 percent and 4.5 percent.
Next year, the government forecasts the economy will expand at between 5 and 6 percent, as the economy starts to recover from the global economic downturn.
