Indonesia to provide cash transfers, working loans for 12 mln MSMEs

Jakarta (VNA) - The Indonesian government is set to provide cash transfers and working capital loans for micro, small and medium enterprises (MSMEs) in its latest bid to boost economic growth amid the COVID-19 pandemic.

Deputy Minister of State-Owned Enterprises Budi Gunadi Sadikin, who is also head of the national economic recovery task force, said on July 29 that the government would provide 2.4 million rupiah (165 USD) in cash each for 10 to 12 million MSMEs, as well as working capital loans of 2 million rupiah for MSMEs.

The assistance is expected to maintain people’s income and be used as working capital to support their businesses, he told reporters during a press briefing. The government will also add working capital loans with low interest for those who have already started businesses.

President Joko Widodo has asked the national economic recovery task force to focus on boosting economic growth in the third quarter of 2020, as well as to maintain employment and income levels to prevent a recession this year, Budi went on to say.

MSMEs have been particularly hit hard by the economic downturn, as the government expects the economy to grow by 1 percent at best or shrink by 0.4 percent at worst this year. It also forecasts a contraction of around 5 percent in the year’s second quarter due to large-scale social restrictions to curb the spread of COVID-19.

The government has allocated 695.2 trillion rupiah to strengthen the country’s virus response and boost economic growth, expanding the fiscal deficit to 6.34 percent of gross domestic product (GDP).

On the same day, the government also guaranteed working capital loans worth 100 trillion rupiah for labour-intensive businesses to help them survive the pandemic.

Finance Minister Sri Mulyani Indrawati stated that to be eligible for the loan guarantee programme, firms are required to employ at least 300 individuals, prove that their activities have been affected by the pandemic, and have a good track record of paying back loans, according to the minister.

Amid the uncertainty about how long the COVID-19 pandemic battle will need to be fought, the government has announced that it will raise its 2021 state budget deficit assumption to 5.2 percent of GDP. The change will be proposed to the House of Representatives, which previously agreed to the government’s proposal of a deficit between 4.17 percent and 4.7 percent of GDP./.