ADB makes $1,5b loan to Indonesia

ADB makes $1,5b loan to Indonesia

MANILA (DPA): The Asian Development Bank (ADB) approved a US$1.5 billion loan package yesterday to fund an Indonesian government program addressing the weaknesses of its financial sector amid worsening economic woes.

The Manila-based ADB said the "exceptionally large loan and investment package" was part of a support initiative under which the bank pledges to disburse a total of 3.5 billion dollars in assistance to Indonesia in the next five years.

"Recent developments have exposed weaknesses in the Indonesian economy and in the way resources are allocated," the bank said in a statement. "Traditionally, the public sector has played a major role in resource allocation in Indonesia. In recent years, however, the financial sector has come to play an increasingly important role."

"There have not been concomitant improvements in financial governance," it added. "The institutional and regulatory framework relating to the allocation of financial resources in the public and private sectors has remained weak."

The measures include the improvement of banking and capital market regulation, increasing transparency in financial information, and strengthening legal and regulatory framework, the ADB said.

Noting the package complements a rescue program by the International Monetary Fund (IMF), the ADB said it hopes to help restore confidence on the financial sector of the world's fourth most populous nation.

In May, Indonesia was confronted with the worst mass unrest in more than 30 years. Street protests, arson and plundering led to nearly 1,200 people being killed, according to estimates of the government's human rights commission.

As a result, then-President Soeharto resigned from office on May 21 after 32 years of autocratic rule.

According to IMF estimates, some 20 million Indonesians - 21.8 percent of the working population - could lose their jobs by the end of the year.