World Bank approves US$2.1 billion investment to support Indonesia's growth and clean energy goals
In a statement on Monday (Jun 16), the World Bank said these are the first initiatives it has approved in support of President Prabowo Subianto's goal of making Indonesia a high-income country by 2045.
The package includes a US$1.5 billion policy-based loan under the Indonesia Productive and Sustainable Investment Development Policy Loan programme, aimed at deepening financial sector reform.
The bank said it will promote the expansion of digital financial services, strengthen credit infrastructure, develop capital markets, and integrate climate and disaster risk considerations into financial planning.
The reforms also target Indonesia's energy transition by easing procurement for renewable technologies through reduced local content requirements.
Complementing these reforms, the second initiative – Sustainable Least-Cost Electrification-2 – focuses on expanding access to renewable energy. The programme aims to deliver electricity to 3.5 million people and support the development of 540 megawatts (MW) of solar and wind power, primarily in Kalimantan and Sumatra.
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'With over 3.5 million people gaining access to electricity, the operation is projected to catalyse improved livelihoods and the creation of more and better jobs – including for women-led enterprises,' said Carolyn Turk, World Bank country director for Indonesia and Timor-Leste.
The initiative is expected to cut power generation costs by at least 8 per cent and reduce greenhouse gas emissions by 10 per cent in the target regions.
The programme will be financed through a blended package comprising a US$600 million loan from the International Bank for Reconstruction and Development (IBRD), US$12 million in grants from the IBRD Surplus-Funded Livable Planet Fund, and US$16 million in grants from global partners, including the United Kingdom and the Green Climate Fund under the Sustainable Renewables Risk Mitigation Initiative.
Manuela Ferro, World Bank vice-president, East Asia and the Pacific, said 'Through blended finance instruments, the World Bank and partners will also help mobilise an additional US$345 million in private investments to finance solar and wind project, as part of a World Bank Regional Energy programme to create national and regional resilient and interconnected energy grids.'
President Prabowo has set a bold target of achieving 8 per cent annual economic growth and creating millions of new jobs. However, the economy expanded by just 4.87 per cent in the first quarter of this year, the slowest pace since Q3 2021.
The figure is a drop from 5.11 per cent in the same period last year, as Indonesia grapples with slowing consumer spending, weaker trade performance, and uncertainty over potential US tariffs.
The World Bank has lowered its 2025 growth forecast for Indonesia from 5.1 per cent to 4.7 per cent, with a projected growth of 4.8 per cent for 2026.
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