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Asian Development Bank Increases Indonesia Disaster Aid to $1B

October 20, 2018

In the wake of further consideration of the devastating earthquake and tsunami which recently hit Central Sulawesi, Indonesia, the Asia Development Bank just increased its emergency assistance aid to the country to $1 billion.

ADB President Mr. Takehiko Nakao (left) with Indonesian President Mr. Joko Widodo (right). Photo: Asian Development Bank

The funds will be used for emergency assistance to support immediate budgetary needs and reconstruction efforts in the affected areas.

The funds were announced during a recent meeting by Asian Development Bank (ADB) President Mr. Takehiko Nakao met with Indonesian President Mr. Joko Widodo today

Coordinating Minister of Economic Affairs Mr. Darmin Nasution, Minister of Finance and ADB Governor Ms. Sri Mulyani Indrawati, and Central Bank Governor Mr. Perry Warjiyo also joined the meeting.

During the Annual Meetings of the International Monetary Fund and the World Bank, Mr. Nakao also met with Indonesian Vice President Mr. Jusuf Kalla and Minister of Public Works and Housing Mr. Basuki Hadimuljono.

In the meeting with President Widodo, Mr. Nakao commended Indonesia’s sound macroeconomic management. He emphasized that Indonesia’s economic fundamentals are solid as shown by the strong GDP growth rate of 5.2% and stable inflation rate of 3.4% expected in 2018. He noted that the current account deficit of around 2.5% of GDP is manageable and that the government’s commitment to containing fiscal deficit at around 2% of GDP is noteworthy. Foreign exchange reserves have been kept at a sufficient level, and Indonesian sovereign bond was rated as investment grade during the current administration.

Mr. Nakao mentioned “the recent depreciation of the Indonesian rupiah may be overblown, driven by speculation, as Indonesia’s overall macroeconomic position today is strong."

Regarding the emergency support, Mr. Nakao mentioned to President Widodo that in addition to an emergency budget support loan of up to $500 million, ADB stands ready to provide additional financing of about $500 million through project loans to support reconstruction of critical infrastructure, such as water supply and sanitation, schools, roads and bridges, and electricity networks among others. The $1 billion emergency assistance is on top of ADB’s regular sovereign lending program to Indonesia, which averages $2 billion annually.

ADB’s emergency assistance loans will be prepared in close coordination with the government, affected communities, and other stakeholders, and submitted to the ADB Board of Directors on a fast-track basis. These loans will have special terms, with grace period of 8 years and a repayment period of 32 years, longer than usual. ADB will also provide technical assistance to support government-led damage needs assessments as well as the recovery and reconstruction planning.

On 8 October, ADB approved a $3 million emergency grant, funded from ADB’s Asia Pacific Disaster Response Fund, to support immediate relief efforts in Central Sulawesi.

During the meeting, Mr. Nakao reiterated ADB’s continued support to Indonesia through project loans for various areas including energy, skills development, irrigation, and border area development, as well as through policy-based lending with a policy matrix to support public sector management and the investment climate. In addition to sovereign lending, ADB’s private sector operations provided loans to private sector projects in such strategic areas as geothermal energy.

ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 67 members—48 from the region. In 2017, ADB operations totaled $32.2 billion, including $11.9 billion in cofinancing.

This article was first published by the Asian Development Bank (www.adb.org).