Jakarta. The Asian Development Bank has approved $1 billion in policy-based loans to support Indonesia's reforms in public expenditure, and to improve the country's investment climate.
The loans will be $500 million for the second phase of the Fiscal and Public Expenditure Management Program and $500 million for the last installment of the Stepping Up Investment for Growth Acceleration Program.
The first loan aims to help the Indonesian government with its budget cycle and expanding social assistance programs, in accordance with the Manila-based lender's goal to improve the country's budget management and transparency.
"The program has enabled the government to increase targeted spending and improve the quality of spending in priority areas such as health and education," Sani Ismail, ADB's senior financial sector specialist for Southeast Asia, said in a statement on Friday (08/06).
Indonesia has reallocated its fuel subsidies to direct assistance for poor families in 2015, including through the cash transfer Family Hope Program (PKH), which targets to reach 10 million poorest households by the end of the year.
This year, the government set a budget of Rp 50 trillion ($3.6 billion) for the program. President Joko "Jokowi" Widodo promised to double it next year.
The second ADB loan is aimed at reducing investment barriers and encouraging more public-private partnerships to boost Indonesia's investment-led growth.
"The program will help the government boost efficient public and private investment, while also addressing investment constraints at the subnational level," Robert Boothe, ADB's public management specialist for Southeast Asia, said in the statement.
Indonesia in recent years has been trying to decrease its complicated regulations and prohibitive costs of setting up and maintaining business to attract more investment. The government has rolled out a series of economic policy packages since 2015, including steps to ease working with its notorious bureaucracy.
The reforms made Indonesia score its seven-year high in foreign direct investment last year, with Rp 430.5 trillion.
Indonesia's rank in the World Bank's "Ease of Doing Business" index has jumped to 72nd out of 190 countries last year, from 114th in 2014. Jokowi wants Indonesia to be 40th by the end of his term in 2019.
In May last year, Indonesia also secured investment grade ratings from the world's "big three" credit rating agencies — Fitch Ratings, Standard & Poor's and Moody's — for the first time since 1997.