World Bank grants $11bn financing facility to Indonesia

The World Bank Group has offered Indonesia a four-year, $11 billion financing facility to support the country’s five-year infrastructure plan.

The proposed funding will come from the International Bank for Reconstruction and Development (IBRD), the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA), all subsidiaries of the Washington-headquartered lender.

The financing facility is the second multilateral commitment to the government’s infrastructure overhaul since the beginning of the year, following an offer by the Asian Development Bank (ADB) to provide $1.5 billion in loans to help finance delayed infrastructure projects in the country last January.

“The World Bank Group is committed to building on the strong and successful partnership we have had with Indonesia for more than six decades,” said Jim Yong Kim, president of the World Bank Group. “We plan to deliver one of our largest financial commitments in the world to Indonesia from the Jakarta office, sharing with Indonesia international knowledge and technical expertise in sectors ranging from energy, health, education, maritime economy, to the delivery of services at the local level.”

Of the proposed new financing, $8 billion will come from IBRD, while $3 billion will be provided by IFC and MIGA. The proposed IBRD financing represents a 25 percent increase in lending by the bank to Indonesia on the previous four-year period.

Chinese President Xi Jinping, on a visit to Jakarta in April, has also expressed his interest to increase China's infrastructure investments in Indonesia. The message was welcomed by Indonesia’s Finance Minister Bambang Brodjonegoro, who has been seeking fresh lending offers to palliate budget deficits.

Jokowi Widodo, Indonesia’s President, has budgeted Rp290 trillion (€26 billion; $22 billion) for infrastructure projects in the country this year – a more than 50 percent increase on the previous year. The programme has since its launch benefitted from a fiscal windfall as the government eliminated fuel subsidies but many projects are still being held back by lengthy bureaucratic procedures and a revision to the state budget.

Pending structural reforms, such as the ongoing implementation of the Land Bank in charge of land acquisition procedure, are also said to be causing investment delays.