Key Takeaways
The prolonged coronavirus disease (COVID-19) pandemic has caused significant damage to Indonesia, including an economic downturn and worsening health outcomes. The pandemic also has worsened poverty and unemployment in the country, especially among the poor and vulnerable groups.
ADB Country Director for Indonesia Jiro Tominaga shares how ADB has supported the Government of Indonesia’s COVID-19 response, especially through the COVID-19 Active Response and Expenditure Support (CARES) Program to help fund government initiatives aimed to strengthen economic growth, public health, and people’s livelihoods.
How is ADB helping Indonesia respond to COVID-19?
Following the onset of the COVID-19 crisis, ADB immediately extended its support to the Government of Indonesia to help address the challenges posed by the pandemic. Two weeks after President Joko Widodo announced the country’s first confirmed cases of the disease in March 2020, ADB provided a $3 million grant to help the government deliver critical medical equipment to protect frontline workers.
Among other financial assistance, ADB approved a $1.5 billion COVID-19 Active Response and Expenditure Support (CARES) Program to provide critical budget support to the government to address the pandemic’s fiscal, health, and social impacts. This program just recently concluded. ADB also provided a $500 million loan to help the country manage fiscal risks, as well as future natural disasters and pandemics.
ADB has also provided knowledge support, including a platform that allows a group of experts specializing in health, finance, and economic and social policies to give confidential advice to government officials on how to respond to the pandemic.
Tell us more about CARES. What activities were supported by the program?
CARES helped fund the government’s stimulus package aimed to strengthen social assistance programs for the poor and vulnerable, provide funds for pandemic prevention and control, support efforts to safeguard productive sectors and assist the workforce during the pandemic. It helped boost women’s welfare through support for the health sector, as well as social assistance programs such as conditional cash transfer under Program Keluarga Harapan, or the Family Hope Program, and Sembako, or food assistance program.
The program’s country engagement framework bolstered the government’s COVID-19 response and recovery plans. Under the framework, a high-level policy committee co-chaired by Indonesia’s vice minister of finance and ADB’s vice president for East Asia, Southeast Asia, and the Pacific monitored the implementation of the government’s special policies, plans, and programs related to COVID-19. The committee met quarterly to discuss progress and identify gaps to improve the implementation process. The fourth and final committee meeting was held in mid-February this year.
After more than one year of monitoring, what was the committee’s views on CARES implementation in Indonesia?
To respond to the challenges posed by the COVID-19 pandemic, the Indonesian government mobilized $46 billion in 2020 and $51 billion in 2021 through five clusters—public health; social assistance; support for micro, small, and medium-sized enterprises (MSMEs) and corporations; enterprises incentives; and priority programs as part of its National Economic Recovery Program or Program Pemulihan Ekonomi Nasional (PEN)—to improve macroeconomic stability, health outcomes, and safeguarding livelihoods.
The government carried out the response effectively. In 2020, the government disbursed close to $39 billion, or about 82% of the 2020 budget allocation. The execution of the program improved in 2021. By the end of the year, it had disbursed nearly $45 billion, or about 88% of the 2021 budget allocation. Disbursement rates were the highest in support for enterprises, public health, and social assistance.
MSMEs and the informal sector benefited from various government programs, such as loan interest subsidies, financial support for micro-business and street vendors, and provision of government guarantee on loans for MSMEs and corporations. About 12.8 million MSMEs received support from these programs.
Meanwhile, the government spent $11.61 billion on social assistance programs, benefiting the poor and vulnerable groups, including 28.8 million households through the rice assistance program.
What are some of the recommendations that the committee may have for improving a similar program in the future?
Moving forward, the committee encourages the government to continue its agile approach to policy making and close coordination with state and local governments and the private sector. The government can still call for precautionary measures when a new coronavirus variant threatens public health. That could include temporary entry bans for travelers from high-risk countries and measures to strengthen government capacity for testing, contact tracing, and setting up isolation facilities, as well as the targeted implementation of community restrictions.
As Indonesia starts treating COVID-19 as endemic, it will be important for the government to strengthen health systems, stockpile vaccines, and speed up vaccinations, including rolling out boosters. The PEN budget for 2021 focused on assisting the poor and vulnerable and enterprises in need. The government should continue its digitalization efforts; an integrated and well-governed database, including gender-based data, can reduce the risk and severity of future pandemics.
Beyond the pandemic, ADB will help Indonesia better anticipate and mitigate future crises, including natural disasters and other health-related emergencies. We will support government efforts to strategically map the country’s development needs and chart pathways to achieve Indonesia’s 2045 vision.
What’s next?
We believe the government’s macroeconomic and fiscal response has been timely and effective. It will be critical for the government to continue to take steps to bring the pandemic under control and stimulate economic activity, investment, and job growth. ADB will continue to support the government’s monitoring of the economic recovery program. We are also ready to provide knowledge support for the government’s efforts for robust recovery from the COVID-19 pandemic beyond the CARES program. One area of support is on fiscal policies for green recovery.
Beyond the pandemic, ADB will help Indonesia better anticipate and mitigate future crises, including natural disasters and other health-related emergencies. We will support government efforts to strategically map the country’s development needs and chart pathways to achieve Indonesia’s 2045 vision.
One pathway is decarbonization. Last year, Indonesia and ADB agreed on the Energy Transition Mechanism to leverage a market-based approach to accelerate the transition from fossil fuels to clean energy. ADB is committed to working closely with Indonesia to achieve a just and affordable energy transition.
