JP/2/A00

RI to receive $250m loan from World Bank

Bloomberg Jakarta

The World Bank said it approved a US$ 250 million loan to Indonesia to fund health programs, alleviate poverty and build roads and other infrastructure projects.

The aid will help to support an estimated 20,000 villages stretching from Sumatra in the west to Papua in the east from 2003 until 2008, project director Scott Guggenheim said in Jakarta. It is part of the estimated $850 million the bank agreed to lend Indonesia for the 10-year project that started 1998.

"The government doesn't have the money," Guggenheim said. "And, there are a lot of poor villages that need the services."

Indonesia is counting on overseas loans and investment to help expand its economy by at least 4 percent this year and create new jobs. The cash-strapped government can't stimulate the economy with state spending in the face of a budget deficit estimated at Rp 34.4 trillion (US$4.2 billion).

The World Bank estimates growth will slow to 3.3 percent this year from 3.7 percent last year. Indonesia has about 40 million unemployed people, with 2.5 million entering the workforce yearly.

In January, international lenders extended $2.7 billion to the government and another $400 million for provincial governments and non-governmental aid organizations. The Asian Development Bank and the World Bank said then that new loans would depend on Indonesia's ability to curb corruption and help boost investor confidence by giving them avenues for legal recourse.

In June 2002, the World Bank canceled loan disbursements from an $88 million development project in cities across Sulawesi island due to concerns of misuse of aid. It had disbursed $76 million.

Earlier this month, the World Bank said it is willing to lend as much as $1 billion a year from an earlier pledge of $850 million, to bolster Indonesia's economy. The increase is pending Indonesia's efforts to better monitor the use of development loans, the bank said.

The World Bank lent Indonesia $419 million last year and has disbursed $84.5 million this year.