The Asian Infrastructure Investment Bank (AIIB) has approved a total of USD1 billion in loans for two projects in Indonesia as part of a coordinated international effort to support the Indonesian Government’s plans to strengthen the country’s social safety nets, bolster its health response and stem the economic downturn from the coronavirus health crisis.
The first loan, totaling USD750 million and cofinanced with the Asian Development Bank, will go toward bolstering economic aid for businesses, including small and medium-sized enterprises, support for poor and vulnerable households, and strengthening the country’s health care systems.
AIIB, in partnership with the World Bank, has approved an additional USD250 million to further strengthen the government’s immediate health response, which includes readiness for testing, surveillance, prevention and treatment of COVID-19, as well as hospital readiness.
“The COVID-19 pandemic has forced many developing countries to make difficult trade-offs to meet the urgent needs of their citizens. AIIB’s support for Indonesia will contribute to the government’s efforts to navigate these challenges during highly uncertain times,” said AIIB Vice President, Investment Operations, D.J. Pandian.
The pandemic is expected to further strain Indonesia’s health system, which aims to catch up to its regional peers in terms of main health indicators. Meanwhile, projections for economic growth in 2020 forecast a sharp drop from the pre-COVID-19 projection of 5 percent to 2.3 percent, according to the government. It is further estimated that job losses due to the shutdown of the economy could be in the range of one million to seven million.
“We appreciate AIIB for the quick response and flexibility to the urgent need of member countries during the health and economic crisis. And we thank AIIB for the USD750 million loan to the Government of Indonesia for the COVID-19 Active Response and Expenditure Support (CARES) Program co-financed with ADB, plus an additional USD250 million loan on Program for Results co-financed with the World Bank. These loans are important for Indonesia to support health care and protect urgently needed social expenditure, and expand social assistance programs for the poor and vulnerable people to reduce the adverse social and economic impacts of COVID-19,” said Vice Minister of Finance of Indonesia, Mr Suahasil Nazara,
Vice President Pandian added that by tailoring its financial product offerings, AIIB has been able to deliver a timely and flexible response to its members to ensure economies will rebound as swiftly as possible.
“Indonesia had demonstrated sound macroeconomic management prior to the shock and shown a solid commitment to achieving the Sustainable Development Goals. We will continue to be responsive to the country’s needs through the crisis, so that it may continue its upward trajectory,” Pandian added.
While AIIB does not have a regular instrument for policy-based financing, the Bank is extending such financings on an exceptional basis under the COVID-19 Crisis Recovery Facility to support its members through projects cofinanced with the World Bank or the Asian Development Bank.
AIIB’s COVID-19 Crisis Recovery Facility, created as part of the coordinated international response to counter the COVID-19 crisis, has an initial size of USD5-USD10 billion to support AIIB members’ urgent economic, financial and public health needs and quick recovery from the crisis. AIIB is currently reviewing projects from a number of members. Projects being proposed under the facility can be found here.
Additional information about the Indonesia COVID-19 Active Response and Expenditure Support Program can be found here and the Indonesia: Emergency Response to COVID-19 Program – Policy on Program for Results can be found here.
The Asian Infrastructure Investment Bank (AIIB) is a multilateral development bank with a mission to improve social and economic outcomes in Asia. Headquartered in Beijing, we began operations in January 2016 and have now grown to 102 approved members worldwide. By investing in sustainable infrastructure and other productive sectors in Asia and beyond, we will better connect people, services and markets that over time will impact the lives of billions and build a better future.