The Asian Development Bank approved a $150 million loan to Indonesia for economic recovery

2022-05-02 0 By

The Asian Development Bank (ADB) has approved a $150 million loan to Indonesia to support its economic recovery from the pandemic.The loan would later serve as a catalyst for government and private funding to support green and viable infrastructure projects to help Indonesia achieve the Sustainable Development Goals (SDGs).Indonesia’s SUSTAINABLE Development Goals Green Finance Fund (SIO-GFF), the first of its kind in Southeast Asia, aims to finance at least 10 projects, with at least 70 percent supporting green infrastructure and the rest supporting the SDGS.”Sio-gff aims to be an eight-fold catalyst for our investment to support climate-friendly infrastructure and help Indonesia move towards its sustainable development goals,” Anouj Mehta, director of green and Innovation Finance for Southeast Asia, said in a statement on Wednesday.The Director of the ADB’s Thailand office also ensured that the agency would design viable projects to attract funds to supplement government spending, including from private, institutional and commercial sources.”The facility will promote sustainable infrastructure development and accelerate Indonesia’s recovery from the pandemic by raising funds and creating jobs,” he said.The loan to the Indonesian government will be forwarded to Sarana Multi Infrastruktur (SMI), a state-owned infrastructure finance agency that will manage the facility.The ADB also approved technical assistance to help strengthen SMI’s capacity to operate the facility and expand SMI’s services to support other borrowers and promote private financing.Technical assistance totalling $1.2 million came from the Australian Department of Foreign Affairs and Trade and $375,000 from the Luxembourg Special Fund for Partnership for Financial Sector Development.According to the ADB report, Indonesia’s annual infrastructure financing needs from 2016 to 2020, including the climate change component, are estimated to average about us $74 billion, with an annual infrastructure financing gap of US $51 billion.The facility is therefore designed to help manage credit risk throughout the life of the project, particularly during the construction phase and early commercial operations where cash flow is still negative.The facility will mainly offer the possibility of loans, equity, convertible debt and guarantees to reduce the credit risk of the project and attract commercial lenders.The project is in line with Indonesia’s 2030 Agenda for Sustainable Development and the ADB’s Indonesia Country Partnership Strategy for 2020-2024, focusing on accelerating economic recovery and building resilience.