ADB endorses 150 million USD loan to support economic recovery in Indonesia

A corner of Indonesia's Jakarta (Photo: AFP)

Jakarta (VNA) -  The Asian Development Bank (ADB) has approved a 150 million USD loan which aimed at accelerating Indonesia’s economic recovery from the COVID-19 pandemic.

Unit Head of ADB’s Green and Innovative Finance for Southeast Asia and Country Director for Thailand Anouj Mehta, said the fund will be utilised to support green and bankable infrastructure projects to help the country reach the United Nations' Sustainable Development Goals (SDGs).

The Sustainable Development Goals Indonesia One–Green Finance Facility (SIO-GFF), the first of its kind in Southeast Asia, is projected to finance at least 10 projects, with at least 70 percent of the financing supporting green infrastructure and the rest supporting the SDGs. The facility will design bankable projects to attract funding to supplement public expenditure, including from private, institutional, and commercial sources.

The SIO-GFF aims to catalyse up to eight times the funds invested to support climate-friendly infrastructure and help Indonesia make progress toward the SDGs, he said.

The loan to the Indonesian government will be re-lent to PT Sarana Multi Infrastruktur, or PT SMI, a state-owned infrastructure financing institution, which will administer the facility.

The ADB also approved technical assistance to help strengthen PT SMI’s ability to implement the facility and eventually broaden the firm’s services to support other borrowers and catalyse private funding.

The technical assistance is funded with 1.2 million USD from Australia’s Department of Foreign Affairs and Trade and the rest from Luxembourg’s Financial Sector Development Partnership Special Fund.

ADB Senior Financial Sector Specialist Benita Ainabe said Indonesia received the support because it is the world’s fifth-largest emitter of greenhouse gas emissions (GHG) and accounted for more than half of GHG emissions in Southeast Asia.

Indonesia’s annual climate-adjusted infrastructure financing needs estimated to be 74 billion USD on average in the 2016 -2020 period, according to an  ADB report.

The facility seeks to help manage credit risk during the life cycle of projects, especially the construction phase and the early years of commercial operations when cash flow is negative.

The project is in line with Indonesia’s 2030 Sustainable Development Agenda and follows ADB’s country partnership strategy for the country in 2020–2024 period, which focuses on accelerating economic recovery and strengthening resilience./.