ADB is supporting Indonesia’s efforts to enhance its resilience against adverse effects of increased volatility in the financial market. The precautionary financing facility will provide stand-by loans to fund the government’s budget needs. Indonesia is committed to first meeting its financing needs from market sources and will back up its intention with confidence-boosting policy measures.
|Project Name||Precautionary Financing Facility|
|Project Type / Modality of Assistance||Loan
|Source of Funding / Amount||
|Strategic Agendas||Inclusive economic growth
|Drivers of Change|
|Sector / Subsector||
Public sector management / Economic affairs management
|Gender Equity and Mainstreaming||No gender elements|
|Description||Like many other economies, the Indonesian economy has been affected by the deterioration in the global economic outlook and turbulence in the financial markets. Learning from lessons learned from the 1997/98 Asian Financial Crisis (AFC) and the 2008/09 global financial crisis, the Government has introduced a number measures to safeguard against any major trade and financial impacts emanating from the current global economic situation. The proposed $500 million INO-PFF (a countercyclical support facility with a precautionary financing option) will enhance the Government's preparedness to address the potential adverse impact of increased volatility in the financial market, given the government's increased dependence on the market to meet its budget financing needs. The Government has met the access criteria under ADB's guidelines for a countercyclical support facility: (i) continued good macroeconomic management; (ii) potentially significant economic impact (resulting, in this case, from a possible worsening in the eurozone crisis); and (iii) implementation of a countercyclical program in the revised 2012 budget.|
|Project Rationale and Linkage to Country/Regional Strategy||The proposed INO-PFF will be part of a $5-5.5 billion contingent financing package provided by ADB, the World Bank, the Government of Japan, and the Government of Australia. The Government of Indonesia is committed to first meet its financing needs from market sources and will back up its intention with confidence-boosting policy measures. The Government of Indonesia will use the facility as an insurance device and fall-back option to be utilized only if market stabilization operation, utilization of alternatives debt financing sources, and utilization of accumulative surplus cash are unable to fulfill the financing need (Appendix 4). The Government believes that the announcement of this support package would send a strong positive signal to the markets, making it more likely that Indonesia would meet its financing needs in 2012 and 2013 from market sources.|
|Impact||Sustained pro-poor economic growth|
|Description of Outcome||Government maintains priority spending and stimulates domestic demand|
|Progress Toward Outcome|
|Description of Project Outputs||
Market confidence maintained
Government financing needs met in the event of larger financial market turbulence or crisis
|Status of Implementation Progress (Outputs, Activities, and Issues)|
|Summary of Environmental and Social Aspects|
|Stakeholder Communication, Participation, and Consultation|
|During Project Design||On 20 February 2012, IRM received a formal letter from the Minister of Finance addressed to President Kuroda, asking for ADB to work with other development partners to develop what cooperation framework similar to what we provided in 2009. Before the formal request, an informal request was received by ADB and other development partners in December 2011 for a precautionary financing. Since then, IRM have engaged in productive discussions on nearly a weekly basis to look at the proposal. IRM has been very careful in managing expectations with the government and, in fact, throughout the process, IRM has discussed the pros and cons with the government and development partners. An important reason for the government is the lesson emanating not only from the 1997/98 crisis but also from the 2008/09 crisis. The request is put forward by the government based on advanced thinking on potential risks that are still there despite the country's current good economic performance. The facility should be seen as part of the country's economic risk management strategy given current uncertainties and its large financing needs from market sources.|
|During Project Implementation||The Director General of Debt Management (DGDM) will be the executing agency to coordinate, monitor, and evaluate the implementation of the financing plan and the government's countercyclical fiscal stimulus programs supported by the loan. DGDM will convene a quarterly meeting attended by representatives from the government and development partners to oversee the implementation of the financing plan. The monitoring of the fiscal stimulus programs will utilize the government system. For example, for infrastructure spending, the government has also assigned the President's Delivery Unit for Development Monitoring and Oversight to monitor and coordinate its implementation. The government and development partners will meet each quarter to review (i) macroeconomic conditions, (ii) implementation of the financing plan, (iii) the government's countercyclical programs, and (iv) the government's financing shortfall. The coverage period for the facility is from 1 July 2012 to 31 December 2013. The loan of $500 million is to be disbursed when the government (i) has met the drawdown criteria set out in the government's financing plan; and (ii) maintain sound macroeconomic management. The proceeds of the loan will be disbursed in accordance with the provisions of ADB's Simplification of Disbursement Procedures and Related Requirements for Program Loans.|
|Responsible ADB Officer||Ginting, Edimon|
|Responsible ADB Department||Southeast Asia Department|
|Responsible ADB Division||Indonesia Resident Mission|
Directorate General of Debt Management
Ministry of Finance
Jl. Lapangan Banteng Timur 2-4
P.O. Box 1139, 10710 Jakarta, Indonesia
|Concept Clearance||22 Jun 2012|
|Fact Finding||23 Jun 2012 to 08 Jul 2012|
|MRM||30 Apr 2012|
|Approval||18 Jun 2012|
|Last Review Mission||-|
|Last PDS Update||08 Jun 2012|
|Approval||Signing Date||Effectivity Date||Closing|
|18 Jun 2012||17 Jul 2012||18 Sep 2012||31 Dec 2013||31 Dec 2015||18 Mar 2016|
|Financing Plan||Loan Utilization|
|Total (Amount in US$ million)||Date||ADB||Others||Net Percentage|
|Project Cost||500.00||Cumulative Contract Awards|
|ADB||500.00||18 Jun 2012||500.00||0.00||100%|
|Cofinancing||0.00||18 Jun 2012||500.00||0.00||100%|
Project Data Sheets (PDS) contain summary information on the project or program. Because the PDS is a work in progress, some information may not be included in its initial version but will be added as it becomes available. Information about proposed projects is tentative and indicative.
The Public Communications Policy (PCP) recognizes that transparency and accountability are essential to development effectiveness. It establishes the disclosure requirements for documents and information ADB produces or requires to be produced.
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|Title||Document Type||Document Date|
|Amendment to the Loan Agreement for Loan 2871-INO: Precautionary Financing Facility||Loan Agreement (Ordinary Resources)||Dec 2015|
|Precautionary Financing Facility: Major Change in Facility||Loan Change in Scope, Amount, and Implementation Arrangements||Nov 2015|
|Fasilitas Pembiayaan untuk Siaga: Lembar Data Proyek||Translated PDS||Jan 2013|
|Loan Agreement for Precautionary Financing Facility between Republic of Indonesia and Asian Development Bank dated 17 July 2012||Loan Agreement (Ordinary Resources)||Jul 2012|
|Precautionary Financing Facility||Reports and Recommendations of the President||May 2012|
Safeguard Documents See also: Safeguards
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Evaluation Documents See also: Independent Evaluation
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