T

he Islamic Development Bank (IDB) has committed US$5.2 billion worth of loans until 2020 to aid Indonesia’s priority development projects.

“The prioritized sectors include energy, transportation, urban development, higher education and skills development, private sector development and Islamic financial broadening,” said Finance Minister Bambang Brodjonegoro.

The projects will be in line with the country’s 2015-2019 medium-term development plan (RPJMN). This is the second batch of loans of such kind for Indonesia, dubbed the member country partnership strategy (MCPS), after $2.5 billion was pledged for the period of 2011 to 2014 to finance key development areas such as infrastructure and private sector development.

The IDB will work with other donors and lenders, including the World Bank, the Asian Development Bank (ADB) and China-backed Asian Infrastructure Investment Bank (AIIB) “to mobilize additional resources for financing priority projects” in Indonesia.

It could also lend directly to Indonesia’s state-owned enterprises with sovereign guarantees, the Saudi Arabia-based lender said, as quoted by Reuters.

Of the total loan commitment, the IDB Group’s Ordinary Capital Resources would provide $3.2 billion, while IDB Group entities the International Islamic Trade Finance Corporation (ITFC) and the Islamic Corporation for the Development of the Private Sector (ICD) would allocate the remaining $1.8 billion and $200 million, respectively.

Separately, the Islamic Corporation for Insurance of Investment and Export Credit is set to provide $400 million, while the Islamic Research and Training Institute plans to support several capacity-development programs for Islamic banking and finance.

“We highly appreciate the IDB as its financing is in line with Indonesia’s national priorities,” Minister Bambang said.

Indonesia, together with the IDB and the government of Turkey will also set up an Islamic infrastructure bank, which could help finance projects in IDB member countries.

Since its establishment in 1975, the IDB has channeled development funding amounting to more than $113 billion to its member countries. The development bank disbursed $12 billion last year in a bid to give member countries assistance to reduce the impacts of the year’s challenging economic situation and to respond to he countries’ priority development needs.

Going forward, the IDB will prioritize efforts to shift away from dependency on commodities.

“The IDB will prioritize [efforts] to start strengthening each member country to them get out of oil and natural resource dependence,” IDB president Ahmad Mohamed Ali said in his remarks during the IDB’s 41st annual meeting opening ceremony held on Tuesday evening in Jakarta. The event itself began on Sunday and will end on Thursday.

The vision would provide a road map and capitalization, as well as would establish a base for the natural resource industry, Ali added.

With two-thirds of global oil and gas production coming from IDB member countries, the steep commodity price drop last year hit their economies hard.

Vice President Jusuf Kalla, also present at the event, said IDB member countries required good and significant stimulus to improve and support their economic growth, given that most of them were commodity producers.

“This is a wake-up call for us to work together to move our economies, as there is no other option but to carry out reform to achieve growth,” Kalla said, adding that the member countries also wanted to sustainably develop their electricity, transportation efficiency, water, health care and education access, among other things.

— JP/Prima Wirayani