The World Bank approved a US$500 million loans to strengthen Indonesia' financial and fiscal resilience - Photo by World Bank

JAKARTA (TheInsiderStories) – The World Bank approved a US$500 million loans to strengthen Indonesia’ financial and fiscal resilience, the agency announced today. The loan will help the country build and strengthen its financial response to natural disasters, climate risks, and health-related shocks.

From 2014 to 2018, the central government spent between $90 million and $500 million annually on disaster response and recovery. While, local governments spent an estimated additional $250 million over the same period.

The cost of disasters is expected to increase further due to climate change and urban growth, adding to the burden on public spending. The needs are particularly acute now, with Indonesia experiencing multiple financial, fiscal, and social impacts due to the COVID-19 pandemic.

“This support will help the government deliver a more targeted and timely response, reducing the impact of disasters and helping to protect Indonesia’ development progress,” said finance minister, Sri Mulyani Indrawati, in an official statement released on Friday (01/22).

According to World Bank, by reducing the impacts of disasters, such planning can help protect the poor and vulnerable who often bear the brunt of disasters as they tend to live in hazard areas, lack access to basic services, and have limited access to financial resources to cope with the aftermath.

The new project will support the National Disaster Risk Finance and Insurance Strategy by strengthening Indonesia’ fiscal and financial resilience through a Pooling Fund for Disasters. This fund will become the central mechanism through which post-disaster financing can flow from different sources.

The fund will look to leverage domestic and international insurance markets to provide financial capacity to backstop the fund. The project will also help ensure effective and transparent flow of the funds to relevant government agencies, including budget tracking on disaster-related expenditures, faster social assistance payments for victims of disasters, and improved preparedness planning for health shocks.

“The improved availability and flow of funds will ultimately support the population of Indonesia who will benefit from faster and better targeted response to disaster and health shocks,” said Satu Kahkonen, World Bank’ country director for Indonesia and Timor-Leste.

The project is supported by a $14 million grant from the Global Risk Financing Facility to assist building technical capacity, environmental and social management systems, bring new technology to the management of the Pooling Fund, and invest in evaluations and learning, including how to best serve the most  vulnerable groups.

Supported by a Multi-Donor Trust Fund with over $200 million from Germany and the United Kingdom, GRiF provides grants and technical expertise to help developing countries safeguard progress and recover more quickly from the financial impacts of climate shocks, disasters, and crises.

Written by Editorial Staff, Email: theinsiderstories@gmail.com