WB approves new loan program for Indonesia
WB approves new loan program for Indonesia
WASHINGTON (Agencies): The World Bank approved a new loan program for Indonesia on Tuesday worth $400 million a year for three years and said future aid levels could be higher if significant progress was made on economic and social reforms.
The bank said the lending program could be increased to as much as $1 billion a year if Indonesia demonstrated progress in such areas as macroeconomic management, bank and corporate restructuring, and development of a broad-based poverty program.
The new commitment is much lower than the $1.3 billion average yearly funding pledged by the World Bank in the mid-1990s.
However, the World Bank will lend the funds under more generous terms than previously, reflecting a desire to move from a "crisis" approach to a renewed emphasis on poverty alleviation, the bank said in a statement.
About one third of the total lending under the new program will be from the bank's concessional lending arm - the International Development Association.
IDA loans, which are interest free and have terms of up to 40 years, would "ensure a continuing flow of finance for development and poverty reduction without increasing Indonesia's debt-service demands in the near term," the statement said.
"The bank will be there to help Indonesia as a long-term development partner," Managing Director Sven Sandstrom said in a statement. "Improved governance and progress on the reform program will be key determinants of future levels of assistance from the World Bank," he added.
The bank congratulated Indonesian authorities on an "encouraging turnaround" of the economy after a severe economic crisis. The bank said it recognized the complexity of the situation as Indonesia underwent a political transition toward a more open, democratic society.
Regional-autonomy laws that took effect on Jan. 1 aim to give the country's 30 provinces and more than 300 districts a greater say in running their own affairs.
The World Bank said recently that it was not happy with the government's progress on decentralization and feared that newly empowered districts and provinces were not ready to deal with financial matters.
Problems with decentralization constituted one reason that the International Monetary Fund stalled on $400 million in aid in December.
"By moving decisively on the key economic and judicial reforms, Indonesia can help restore investor confidence and attract the private investment necessary for it to regain its footing as one of the emerging economies of Asia," Jemal-ud-din Kassum, the bank's vice president for East Asia and the Pacific, said.
Indonesia, still suffering badly from that crisis, is one of the bank's biggest debtors, owing $12.5 billion. The country's total foreign debt stood at about $140 billion at the end of September.
"Improved governance and progress on the reform program will be key determinants of future levels of assistance from the World Bank," Kassum added.
Indonesia's foreign public debt is already a huge $70 billion, and the government relies on loans from the World Bank and bilateral donor countries to balance its budget.