Washington, DC (BBN)– The World Bank executive board has approved a new budget support operation worth US$2 billion designed to help shield Indonesia against possible future shocks and volatility in global financial markets and economic outlook.
The Program for Economic Resilience, Investment and Social Assistance in Indonesia (PERISAI) was prepared at the request of the Indonesian government, in light of ongoing volatility in global markets, a World Bank statement said on Tuesday.
The loan, which the Government of Indonesia has stated it will use on a contingent basis if fiscal financing costs are prohibitively high, will ensure that Indonesia can maintain critical public spending in the event of increased volatility in financial markets that affect its ability to access market financing.
“Prudent fiscal management served Indonesia well during the 2008 global crisis, and is again likely to be Indonesia’s best defense in this current climate of global uncertainty,” Stefan Koeberle, World Bank Country Director for Indonesia said.
The policy reforms to strengthen resilience being supported by this operation focus on three priority areas.
The areas are maintaining financial system stability, sustaining critical public expenditures and improving the effectiveness of social protection programs to support the poor and vulnerable.
The PERISAI is essentially a development policy loan which the Indonesian government can draw upon in the event of adverse market financing conditions.
Beyond the support provided by the Bank, the Indonesian government is also in discussions with other development partners which may provide parallel financing for the PERISAI program.
BBN/SSR/AD-16May12-1:02 pm (BST)
