JAKARTA. The World Bank Group will pursue an innovative financing method that combines grants from donor countries with the bank’s resources to create lower cost project financing for infrastructure in Indonesia.
With the “blended financing” and the “first loss guarantee,” the bank will combine funds from donor countries such as the Nordic countries to the bank's resources to cut down the interest rate on the loan and reduce risk, said World Bank president Jim Yong Kim at the Indonesia Infrastructure Finance Forum in Jakarta on Tuesday.
Kim added that such blending had successfully attracted conservative funds like insurance companies to invest in developing country infrastructure projects.
Kim said Indonesia had to invest $500 billion in the next five years to close its infrastructure gap. “With that scale, the funds of multilateral financing companies alone are not enough to meet the needs of Indonesia,” he added.
Finance Minister Sri Mulyani Indrawati said that after the 1998 crisis, Indonesian focus was drained by the economic recovery, resulting in meager spending on infrastructure over the last 18 years.
"Now that President Jokowi has gained trust and made the debt to GDP ratio safe, this is the time for us to build what we could not build over the last 18 years," she said.
Kim said the bank had launched a new portfolio of emerging market infrastructure loans that had already secured a guarantee from the Swedish International Development Association that would be combined with International Finance Corporation (IFC) resources. (bbn)
Editor: Sanny Cicilia