This loan was provided following achievements made in the reforms by the government of Indonesia for further stabilising its macroeconomy, improving the investment climate and enhancing fiscal management capacity, and also for the fiscal support for implementing reforms in the future.
At the end of 2003, Indonesia completed the IMF programme instituted in the wake of the Asian currency crisis and has since continued its economic and fiscal reform efforts. As a result, the country has achieved higher growth (from 3.4% in 2001 to 5.1% in 2004), lower inflation (from 13% in December 2001 to 6.2% in October 2004), reduction in government debt and a rise in investment. The Yudhoyono administration has continued to push forward with these reforms since it assumed office in October 2004.
The impact on Indonesia of the tsunami caused by the earthquake that occurred off Sumatra Island in December 2004 was devastating. A joint damage and loss assessment conducted until late January primarily by the government of Indonesia, JBIC, the World Bank and the Asian Development Bank (ADB) made a preliminary estimate of damages and losses at US$4.45bn. Based on this finding, the government of Indonesia is working to put together a detailed reconstruction and rehabilitation plan by the end of March in collaboration with donor countries and agencies, including JBIC. Apart from dispatching medical teams and its self-defence force, the government of Japan has provided emergency grant aid for the tsunami disaster. The provision of this ODA loan will also enable the disaster-hit country to spend its fiscal resources in a timely manner for the country’s reconstruction from the damages and losses of the extremely serious tsunami disaster.