Adrian Wail Akhlas, Jakarta – The Asian Infrastructure Investment Bank (AIIB), a China-backed multilateral development bank, announced on Tuesday that it had approved a US$1 billion loan to help strengthen Indonesia's health and economic responses to the COVID-19 crisis.
AIIB's first loan for Indonesia, totaling $750 million and co-financed with the Asian Development Bank (ADB), will be used for a project to support Indonesia's economic recovery program, including aid for small and medium businesses and vulnerable households.
Furthermore, it has also approved a $250 million loan, in partnership with the World Bank, for a separate program to strengthen the public healthcare response to the crisis, including testing, prevention and treatment of the virus, and to boost hospital readiness.
"The COVID-19 pandemic has forced many developing countries to make difficult trade-offs to meet the urgent needs of their citizens. AIIB's support for Indonesia will contribute to the government's efforts to navigate these challenges during highly uncertain times," AIIB vice president for investment operations DJ Pandian said in a statement on Tuesday.
Indonesia, which saw confirmed cases surge to over 46,800 on Monday, requested the loan to finance its efforts to strengthen hospital readiness, pandemic preparedness and testing capacity.
The government is looking to borrow a total of $7 billion from multilateral organizations including the ADB, AIIB, World Bank and Japan International Cooperation Agency (JICA), according to government officials last month.
The funds will be used to cover the widening budget deficit of 6.34 percent, more than double the initial ceiling of 3 percent, as the government allocates Rp 695.2 trillion (US$49.3 billion) to finance healthcare response and prevent a greater economic meltdown.
The government expects the economy to shrink 0.4 percent this year under the worst-case scenario or grow 1 percent under a baseline scenario. It would be the weakest outcome since the Asian financial crisis hit the country's economy in 1998 and 1999.
"We appreciate AIIB for the quick response and flexibility when it comes to the urgent needs of member countries during the health and economic crises," Deputy Finance Minister Suahasil Nazara said in the joint statement with AIIB.
"These loans are important for Indonesia to support health care and protect urgently needed social expenditure and expand social assistance programs for the poor and vulnerable people to reduce the adverse social and economic impacts of COVID-19."