WB grants Indonesia loan to improve banking sector
WB grants Indonesia loan to improve banking sector
JAKARTA (JP): The World Bank has approved a technical
assistance loan worth US$20 million to Indonesia to improve its
banking sector.
The World Bank (WB) said in a statement yesterday that the
loan was designed to help implement Indonesia's banking reforms
and boost the country's macroeconomic stability.
"This project marks the initial component of a larger
financial and policy assistance package to support a strengthened
macroeconomic framework, implement financial -- particularly
banking -- sector reforms and introduce measures to sharpen
competitiveness and improve governance," the statement said.
The funds are part of the WB's overall $4.5 billion
contribution to a $23 billion IMF-sponsored rescue package
unveiled Oct. 31.
In addition to the WB's contribution, the IMF has pledged $10
billion, the Asian Development Bank $3.5 billion and Indonesia
itself $5 billion over a three-year period.
To supplement the package, some $15 billion has been offered
by the United States, Japan, Singapore, Malaysia, Hong Kong and
Australia as a "second line" contingency fund.
The WB said the first installment was expected to help
strengthen Indonesia's financial sector and reduce concern about
the misallocation of financial resources and the sector's ability
to withstand economic turbulence.
"The speed with which this project was prepared reflects the
World Bank's capacity to respond quickly to client needs and
address the immediate consequences of the turbulence buffeting
the region," World Bank Indonesian country director Dennis de
Tray said.
The WB said that to strengthen its financial sector, Indonesia
needed to improve the efficiency and soundness of its banks,
improve the central bank's supervision capacity and establish
regulations and laws to further develop a modern market-oriented
banking system.
The technical assistance loan has an amortization term of 15
years with a three year grace period, a standard interest rate
for fixed-rate U.S. single currency loans and an expected
implementation period of approximately two years. (aly)