By Judith Ugwumadu | 21 November 2013

The World Bank approved two new development policy loans worth a total of $700m to support ongoing Indonesian reforms in public financial management and connectivity.

The loans would also go towards helping the Indonesian government alleviate poverty and increase shared prosperity, the bank said.

Rodrigo Chaves, the World Bank’s country director for Indonesia, said: ‘Indonesia’s prudent management of its public finances contributes to the country’s ability to weather global economic pressures. 

‘The World Bank continues to support the government’s reform agenda, aimed at improving national connectivity and enhancing the quality of government spending – important policy steps that will help towards increasing shared prosperity for all Indonesians.’

The loans will be channelled into the INSTANSI (Institutional, Tax Administration, Social and Investment) and Connectivity programmes and are the second in a series that was initiated in 2012.

The INSTANSI DPL is set to disburse $400m to boost social safety net spending aimed at reducing the vulnerability of poor households, and the government efforts to strengthen social protection through a national social security system that begins in 2014. This will also support PFM reforms, as an important contribution to improving service delivery.

The $300m Connectivity loan will be spent on strengthening Indonesia’s policy framework for improved trade logistics and facilitation, infrastructure, transportation, and information and communication technology.

Ndiame Diop, the bank’s lead economist and economic adviser for Indonesia, added: ‘Institutional and bureaucratic challenges are among the key obstacles to improving connectivity and infrastructure development in Indonesia today. Addressing these challenges would boost Indonesia’s economic and productivity growth.’