Catalog

1. Indicative Planning Levels for Lending

210. Consistent with the needs and absorptive capacity of Indonesia, ADB’s program of loan assistance is expected to run $0.6 billion-1.2 billion annually. A TA program of $10 million-15 million is expected to support lending and policy advice activities. This is broadly compatible with commitments made in the recent past, although the unprecedented needs of the crisis years preclude any close comparison. Recent support had a large proportion of program lending, particularly apt during the period of economic crisis. In addition, during 2000, in view of the difficulties resulting from the regional economic crisis, a limited amount of ADF support was provided. This support is expected to continue during 2001 and will be evaluated on an annual basis.

211. The actual lending levels will be contingent upon two broad factors: (i) performance and absorptive capacity and (ii) the nature of the financing needs. Concerning the first dimension, several conditions must be present for assistance to be in the upper range:

1. continuation of the wider program of reforms necessary to provide for macroeconomic stability and poverty-reducing growth;
2. continuing concern to target poverty reduction as a development objective;
3. resolution of difficulties with decentralization; and
4. the resolution of project implementation issues as identified particularly in the CPRM.

212. For ADF specifically, the current performance-based assessment will provide an indicative level of resource availability for 2001. This exercise explicitly evaluates performance on a range of items especially related to poverty reduction, macroeconomic management, environment and natural resources protection, and governance.

213. Two other eventualities may result in low levels of lending. As discussed in the section on risks (para. 221), these are the failure to proceed with banking reforms and a systematic breakdown in peace and security. Both situations would prevent ADB from proceeding with major aspects of the strategy.

214. The question of financing needs very much depends on the extent of the recovery from the financial crisis or the emergence of another such crisis, and the successful management of public debt and public budgets.

1. The program must remain flexible to deal with the highly uncertain needs of the country. Recurrence of a regional economic downturn may require fast-disbursing program loans and a higher level of support.
2. Stagnation of reforms, weakening the fiscal position of the Government, may preclude loan funding for all but the most urgent projects.
3. The next time period finds the Government struggling with large debt payments that may discourage reform activities with large associated costs. Although there is a need to maintain flexibility, pure policy-based lending is not expected to predominate. The use of sector development programs (SDPs) would provide a flexible framework to develop projects and programs and should be encouraged where appropriate.