The Asian Development Bank will boost lending to Indonesia to help support the government’s development priorities, the Manila-based lender said in a statement on Friday (12/02).
The ADB said it will increase its commitment to lending to Indonesia to as much as $2 billion per year in the next five years, from about $740 million annually from the 2010 to 2014 period. The means the lending capacity of ADB has been expanding to $10 billion over the next five years.
ADB president Takehiko Nakao met with President Joko Widodo on Friday to discuss areas of future cooperation and notify the president of plans to extend the ADB’s commitment.
Nakao praised Indonesia’s recent economic management, which he said managed to keep inflation low at 4 percent in December, while the fiscal deficit was contained to 2.7 percent of gross domestic product. The current account deficit declined to 2.5 percent of GDP from 3 percent in 2014.
The ADB has forecast Indonesia’s economic growth to accelerate 5.3 percent this year, from 4.8 percent in 2015.
“Wide-ranging economic reforms have bolstered market confidence despite global financial volatility and falling commodity prices,” Nakao said.
“It is critical for Indonesia to continue and strengthen the momentum of reforms to help diversify the economy and enable all Indonesians to benefit from the country’s growth potential.”
He added Indonesia also needs to strengthen efforts to boost domestic tax revenue through expanding the tax base and strengthening the tax administration.
Nakao also met with Vice-President Jusuf Kalla, Minister of Finance Bambang Brodjonegoro and Minister of National Development Planning Sofyan Djalil and is scheduled to meet with chief Economics Minister Darmin Nasution.
During discussions with Indonesia’s high-level government officials, Nakao said the increased ADB funding for Indonesia will support the government’s development priorities, particularly physical and social infrastructure.
In addition to project loans, ADB is actively using policy-based loans and result-based loans. Result-based loans link disbursements to the achievement of results instead of financing project-specific inputs.
ADB, a multinational lender whose mission is to reduce poverty in Asia, provided a total of $1.67 billion in loans to Indonesia last year.
The figure included a $400 million policy-based loan to promote financial market development and financial inclusion; a $400 million policy-based loan to develop the energy sector and a $600 million result-based loan, the first such loan for the country, to support upgrading Sumatra’s power transmission and distribution networks.
This year, ADB said in the statement, the loans will be dedicated to help Indonesia’s education services, public finance management, clean energy, rural infrastructure and flood control.
Still, ADB noted despite Indonesia’s tremendous social, economic and political progress in recent years, around 28 million — or 11 percent — of its population live below the poverty line, and 60 percent of the nation’s labor force works in the informal sector where income is not secure.
Nakao said in the statement that Indonesia wants ADB to be an important partner in formulating Indonesia’s new long-term development strategy “Roadmap 2045.”
Ever since Indonesia joined ADB, as a founding member in 1966, the archipelago nation has received a total of $32 billion in sovereign and non-sovereign loans, $437 million in technical assistance and $430 million in grants.
The multinational lender’s support has been focused on education, transport, water supply, natural resource management, energy, finance, as well as other municipal services.