Helping Economic Recovery, Indonesia Gets A Loan Of 150 Million US Dollars Or Approximately IDR 2.14 Trillion From ADB

Asian Development Bank. (Photo: Doc. Antara/Reuters)

JAKARTA - The Asian Development Bank (ADB) has approved a loan worth 150 million US dollars for Indonesia to accelerate economic recovery due to the impact of the COVID-19 pandemic. This amount is equivalent to IDR 2.14 trillion (IDR 14.251.7 per US dollar exchange rate).

This loan will later become a catalyst for government and private funding in supporting green and viable infrastructure projects, in order to help Indonesia achieve the Sustainable Development Goals (SDGs).

The Sustainable Development Goals Indonesia One-Green Finance Facility (SIO-GFF), the first of its kind in Southeast Asia, aims to finance at least 10 projects, with a minimum of 70 percent of the financing supporting green infrastructure and the remainder supporting the SDGs.

"The SIO-GFF is intended to be a catalyst for up to eight times the amount we invest to support climate-friendly infrastructure and help Indonesia progress towards the SDGs," said Head of ADB's Green and Innovative Financing Unit for Southeast Asia Anouj Mehta in a statement quoted by Antara, Wednesday, February 16.

The ADB Director for Thailand also ensures that this facility will design viable projects to attract funding to complement government spending, including from private, institutional, and commercial sources.

"This facility will increase sustainable infrastructure development and accelerate Indonesia's recovery from the COVID-19 pandemic by raising capital and creating jobs," he said.

The loan to the Indonesian government will be forwarded to PT Sarana Multi Infrastruktur (Persero) or PT SMI, a state-owned institution for infrastructure financing, which will manage the facility.

ADB has also approved technical assistance to help strengthen PT SMI's ability to operate the facility, as well as expand PT SMI's services to support other borrowers and catalyze private funding.

The USD 1.2 million in technical assistance came from the Australian Department of Foreign Affairs and Trade and USD 375.000 from the Luxembourg Financial Sector Development Partnership Special Fund.

ADB Senior Financial Sector Specialist Benita Ainabe said this assistance was given considering that Indonesia is the fifth-largest source of greenhouse gas emissions in the world and contributes more than half of Southeast Asia's greenhouse gas emissions.

"With an innovative financing model that incorporates global green standards, SIO-GFF will help Indonesia focus on climate-resilient infrastructure as it recovers from the COVID-19 pandemic. Learning from our experience in Indonesia, we hope to expand this approach to other countries in the region. this," he said.

According to the ADB report, Indonesia's annual infrastructure financing needs from 2016 to 2020, after including the climate change component, are estimated to average around USD 74 billion, with the annual infrastructure financing gap reaching USD 51 billion.

Therefore, this facility seeks to help manage credit risk throughout the project life cycle, especially during the construction phase and the early years of commercial operations when cash flows are still negative.

The facility will primarily offer loans, as well as the possibility of providing equity, convertible debt, and guarantees, to reduce the project's credit risk and attract commercial lenders.

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