The Asian Development Bank (ADB) on Tuesday approved a US$200 million loan to Indonesia to support the government's ongoing efforts to spur growth and reduce poverty, the bank said in a statement.
ADB's board of directors approved the single-tranche loan to help the government develop a conducive investment climate, improve public financial management and ensure the delivery of public services to the poor.
The loan will mature in 15 years, with a grace period of three years, and an interest rate determined in line with ADB's LIBOR-based lending facility. The Indonesia's Coordinating Economic Ministry will have an executing agency for the program, the banks says.
"The primary rationale of this fifth support program is to reinforce the *Indonesian* government's efforts to improve competitiveness, to boost public financial management and governance and to contribute to poverty reduction and improve public service delivery to the poor," said Sharad Bhandari, a senior country specialist at ADB's Indonesia resident mission.
The government expects Indonesia's economy to grow 5.5 percent in 2010, up from an estimated 4.3 percent this year, with the global economy set to improve.
Indonesia's poverty rate, which stood at 14.15 percent in March, is also expected to decline as the economy gears toward recovery.
This ADB program is also designed to harmonize policy reform work with key development partners - including the World Bank and the Japanese government - to improve the effectiveness of aid delivery, the bank says.
The program will include reforms focused on debottlenecking regulations hampering investment; improving the government's budgeting process and management of public funds; and fine-tuning poverty alleviation programs to make sure they reach those who need them the most.
Prior to this loan, the ADB had provided Indonesia with a $1 billion Public Expenditure Support Facility program loan, and a $500 million countercyclical support loan to help the government counter impacts of the global economic downturn.
According to the ADB, there have been broad improvements in Indonesia since the 1997/1998 Asian financial crisis - in terms of attracting investment, governance and other key areas. Nevertheless, significant challenges remain, it says.
The central bank says inflation should be closely guarded next year as it could increase rapidly. Inflation may reach 5.5 percent next year, up from an estimate of 3 percent in 2009.
The supply of goods should be boosted by increasing production, to compensate for increasing demand and avoid high inflation, BI said.
