Photo by ADB

JAKARTA (TheInsiderStories)—Board of Directors of Asian Development Bank (ADB) approved two policy-based loans to Indonesia amounting US$1 billion.

The loan is intended to push fiscal reform and government spending, as well as encourage investment in order to reduce poverty and decrease income inequality.

The two loans of each value of US$500 million will be equipped with parallel financing equivalent to 200 million euros from German development cooperation through Kreditanstalt fuer Wiederaufbau (KfW).

The first loan will be used to support Fiscal and Public Expenditure Management Program (FPEMP). This program aimed to reform fiscal policy and government spending by helping the government improve budget preparation, transparency, and monitoring.

The program will help the government to increase targeted spending and quality spending in priority areas, such as health and education in line with the implementation of the UN Sustainable Development Goals (SDG), said Senior Financial Sector Specialist at Southeast Asia Department of ADB Sani Ismail in a press release on Friday (08/06).

Furthermore, the second loan will finance Stepping-up Investment for Growth Acceleration Program (SIGAP). The program aimed to increase economic growth through investment by making Indonesia’s regulation be friendlier to investors.

The program is expected help government to improve the efficiency of public and private investment, as well as addressing investment constraints at the local level. In addition, the program includes consolidating and accelerating business licensing process, institutionalizing adequate regulatory practices, and introducing tools and systems in the investment process.

ADB has been working with the Indonesian government for almost 20 years in the infrastructure development and the investment competitiveness. This loan is the third and final stage for SIGAP program that begins in 2014 to address specific constraints on public and private investment.

ADB then approved another loan in 2016 to support government-private framework and promote government procurement reforms to improve efficiency and transparency.

Indonesia still relies on the ABD’s loan even though President Joko Widodo in the 60th anniversary of the Asian Asians Conference in April 2015 criticized the existence of the international financial institutions including ADB.

“The view that the world economic problem can only be resolved by the World Bank, the International Monetary Fund (IMF), and the ADB (Asian Development Bank) is an outdated view that needs to be discarded,” he said in front of representatives of Asia and Africa countries.

He added the world economy should not rely on the three international financial institutions. Developing countries, especially in Asia and Africa must build new economic power.

“We urge the reform of the world’s financial structure, eliminating the domination of the group of countries over other countries,” he said.