World Bank signs $242.6m loans for RI
World Bank signs $242.6m loans for RI
Bloomberg, Jakarta
The World Bank agreed to provide Indonesia with a US$242.6 million loan to help finance a number of projects, including power, gas distribution and health care.
The loan agreement was signed by the bank and the government on Wednesday.
The Ministry of Finance said around $141 million of the loan would be used to help finance the Java-Bali power project, while the remainder would go to health care programs in Kalimantan and Sumatra, and to help improve the operation of state-owned gas transmission and distribution company PGN.
The loans will mature in 25 years to 35 years, and have annual interest rates of between 0 percent and 2.5 percent, World Bank country director in Indonesia Andrew Steer said.
"There has been chronic under-investment in the area of health and power supply since the crisis," Steer said, referring to the Asian financial crisis of 1997-98, when Indonesia faced economic collapse because of a run on its banks and currency amid slumping regional trade.
The World Bank is one of Indonesia's major multilateral lenders.
Standard Chartered Bank CEO for Jakarta Stewart Hall said loans "send a positive message, it's an ongoing stamp of approval."
"When the Asian Development Bank, World Bank or International Monetary Fund signs off (on such a loan) it's a good thing, a barometer that people watch," he said.
"The general macro picture - with the credit rating upgrade, falling interest rates and inflation, and the stronger currency -- is good, but people need to be aware that markets might be getting ahead of themselves," Hall said.
International credit rating agency Moody's Investors Service on Tuesday raised the nation's foreign currency credit rating and its domestic issuer rating one level to B2, five levels below investment grade. The increase was the first by Moody's since it began assessing the country in 1994 and puts Indonesia's ratings on a par with Brazil and the Ukraine.
The upgrade follows similar action by Standard & Poor's in May and is likely to raise investor confidence in an economy forecast to expand 4 percent this year and 5 percent in 2004, analysts said.