Indonesia provided with US$5 billion stand-by loans

Indonesia provided with US$5 billion stand-by loans

(ANTARA/Andika Wahyu)

Indonesia has received a similar facility from development partners in 2009 and 2010.
Jakarta (ANTARA News) - Indonesia has secured commitment for US$5 billion stand-by loans from international parties to anticipate budget funding problems in 2013.

According to the draft 2013 budget and financial note documents received here on Friday the amount is equal to Rp46.5 trillion based on the assumed exchange rate of Rp9,300 per US dollar.

Sources of the loans include the World Bank through "Program for Economic Resilience, Investment and Social Assistance in Indonesia" (Perisai) totaling US$2 billion (Rp18.6 trillion), the Asian Development Bank through the Precautionary Financing Facility program worth US$0.5 billion (Rp4.65 trillion), the Australian government through the Contingency Facility program worth US$1 billion (Rp9.3 trillion) and the Japan Bank for International Cooperation (JICA) through the Contingency Loan Facility program totalling US$1.5 billion (Rp13.95 trillion).

To deal with financial market conditions which are still vulnerable as the US economy has not yet recovered and because of a debt crisis in the European zone, the Indonesian government has prepared efforts to maintain the country`s economic growth and macro-economic stability comprehensively.

Learning from its experience during the 1997-1998 Asian financial crisis and global financial crisis in 2008-2009 the Indonesian government has prepared pro-active measures to assure meeting the budget funding to deal with increasing volatility in the global financial market and to maintain the country`s macro-economic fundamentals.

One of the measures is preparing stand-by loans with support from international development partners to be used in case the government cannot meet funding needs through the capital market such as through issuance of state bonds.

The measure is taken to anticipate possible external risks as a result of export decline and turbulence in the financial markets that would make seeking funds through the market difficult and burden of cost of funds soaring.

The contingency funding facility is an insurance-like facility meant as a financing back-up for the government especially during 2012 and 2013.

The facility will only be used in case of an extreme condition in the capital market that makes the government difficult to find financing sources and only after other pro-active steps taken such as activation of the Bond Stabilization Framework and exploitation of other funding sources such as excess budget.

The government hopes the stand-by loans would provide a strong positive signal for financial market players that it has been prepared to meet a possible crisis in meeting funding needs and assure availability of fiscal anticipatory measures.

Indonesia has received a similar facility from development partners in 2009 and 2010 that has helped increasing market confidence in the country`s economy.

During the process of procuring the facility the government has conducted intensive talks with development partners including international institutions such as the World Bank and the ADB and bilateral cooperation partners such as Australia and Japan.

In view of the country`s strong macro-economic fundamentals and policy the development partners conducting multilateral and bilateral cooperation with Indonesia have shown readiness to consider providing funding in parallel with the contingency facility.