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News from 2020-11-16 / KfW Development Bank

Support for Indonesia’s Corona aid programme

hospital in Indonesia
In order to effectively combat the spread of corona, Indonesia now receives assistance to improve the health system and increase hospital capacity.

Indonesia is severely affected by the coronavirus, and its health system is worse off than in neighbouring countries. The government is tackling the pandemic with a comprehensive programme supported by the Asian Development Bank (ADB) and other donors. KfW is joining in and has granted the Indonesian government a loan of EUR 550 million on behalf of the German government.

Jakarta is in a second lockdown since mid-September. People in the metropolis are now only allowed to leave their homes for urgent needs such as shopping, doctor's visits and the like. Infection rates in the South East Asian country have shot up alarmingly. Already 14,000 Indonesians have died of COVID 19. But there is one ray of hope: So far, hospitals are not overburdened. Yet the country's health system is poorly prepared for a pandemic compared to neighbouring countries. Before Corona, there were only 2.7 intensive care beds per 100,000 inhabitants and only 40 doctors.

The government has launched a large-scale programme to prepare the country for the pandemic. The most important measures are the development of the health system and support for the needy and for small businesses. The USD 40 billion programme is also financed by loans. The ADB, the Asian Infrastructure Investment Bank (AIIB) and the Australian Government have provided loans for this purpose. KfW is now joining them and supporting Indonesia on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ) with a total of EUR 550 million. "We got the contracts signed in record time," says KfW portfolio manager Peter Maats. "We were able to mobilise the joint aid for Indonesia at very short notice".

"Cooperation with KfW is important to reduce the burden of the Corona pandemic on our society and economy," says Suahasil Nazara, Indonesia's Deputy Minister of Finance. "Thanks to our well-developed financial system, Indonesia was able to counter the crisis early on. The government's aid benefits especially the most vulnerable groups and the poor".

The Indonesian government has established a national emergency plan in line with World Health Organisation recommendations. The programme co-financed by KfW enables the expansion of hospital capacities. Around 41,000 beds in 132 clinics have been reserved for COVID 19 patients. An emergency hospital with 1,800 beds was built in the former athletes' village of the 2018 Asian Games in Jakarta. Additional laboratories were set up, 13 medical schools and 13 teaching hospitals were converted for this purpose. Protective equipment and test kits were procured for the medical staff.

In order to mitigate the social consequences of the pandemic and the lockdown, Indonesia has initiated relief measures for the needy and small businesses. Existing aid programmes have been increased, food ration cards issued and electricity costs waived. About 20 percent of the population has already been living just above the poverty line. The World Bank fears that the poverty rate in Indonesia will rise by 10 percent. The social aid programmes are designed to prevent poverty. "As the country has already strongly pushed ahead with digitalisation, the funds can be disbursed immediately," Peter Maats affirms. "People in remote rural regions of the island state will also be reached quickly."

In Indonesia, more than 90 percent of the employees work in micro, small and medium-sized enterprises. For these, the Indonesian aid programme includes subsidised loans and reduced income taxes. In recent years, the country's economy has grown steadily, and forecasts for 2020 have been lowered considerably. Economists assume that the economy will shrink moderately in 2020 (-2.2%) and grow significantly again next year. The government's aid programme supports small and medium-sized enterprises in particular to ensure that the economic impact of the pandemic remains bearable, also thanks to the emergency programmes.