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Indonesia Enhances Resilience to Global Volatility with World Bank Support

May 16, 2012

Washington, May 15, 2012 – The World Bank executive board today approved a new budget support operation worth $2 billion designed to help shield Indonesia against possible future shocks and volatility in global financial markets and economic outlook.

The Program for Economic Resilience, Investment and Social Assistance in Indonesia (PERISAI) was prepared at the request of the Indonesian government, in light of ongoing volatility in global markets. The loan, which the Government of Indonesia has stated it will use on a contingent basis if fiscal financing costs are prohibitively high, will ensure that Indonesia can maintain critical public spending in the event of increased volatility in financial markets that affect its ability to access market financing. 

"Prudent fiscal management served Indonesia well during the 2008 global crisis, and is again likely to be Indonesia's best defense in this current climate of global uncertainty,” says Stefan Koeberle, World Bank Country Director for Indonesia. "The PERISAI contingency loan will send a strong positive signal to financial markets through a set of policy reforms that strengthen Indonesia's crisis preparedness, making it more likely that Indonesia would meet its financing needs from market sources."

The policy reforms to strengthen resilience being supported by this operation focus on three priority areas: (i) maintaining financial system stability, (ii) sustaining critical public expenditures, and (iii) improving the effectiveness of social protection programs to support the poor and vulnerable.

"PERISAI is a preventive program that follows in the footsteps of the successful Public Expenditure Support Facility, which the World Bank helped prepare for Indonesia in 2009, largely for the same reasons. It helped lend credibility to Indonesia during a time of extreme global uncertainty, allowing Indonesia to stay on track with its ambitious development agenda,” says World Bank senior economist and PERISAI team leader, Enrique Blanco Armas.

PERISAI is essentially a development policy loan which the Indonesian government can draw upon in the event of adverse market financing conditions. Beyond the support provided by the Bank, the Indonesian government is also in discussions with other development partners which may provide parallel financing for the PERISAI program.


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