WB helps Indonesia achieve more resilient financial sector

A street in Jakarta, Indonesia (Photo: Xinhua/VNA)

The bank said the COVID-19 pandemic has caused recession in Indonesia, with potentially long-lasting financial, fiscal, and social implications. While the banking system is well-capitalised and profitability is high, the lack of depth in the Indonesian financial markets increases the country’s vulnerability to external shocks.

The new financing is designed to help the country address financial sector vulnerabilities heightened by the pandemic. It does so through support to measures such as extending financial services to previously underserved groups, reducing the costs of such services for individuals and businesses alike, and strengthening the capacity of the financial sector to withstand financial and non-financial shocks.

The Government of Indonesia is committed to strengthening the financial sector given its critical role in sustaining Indonesia’s growth and in reducing poverty, especially during the COVID-19 recovery phase, said Minister of Finance Sri Mulyani Indrawati.

This financing complements the government’s efforts to cushion the financial sector and the overall economy from the impacts of the COVID-19 crisis, said Satu Kahkonen, World Bank Country Director for Indonesia and Timor-Leste.

The bank’s support to financial sector reforms in Indonesia is an important component of the World Bank Group’s Country Partnership Framework for Indonesia, whose engagement area on strengthening economic resilience and competitiveness contains a specific objective focused on increasing the depth, improving the efficiency and strengthening the resilience of the financial sector.

The new financing is also based on the World Bank Group’s GRID (green, resilient, inclusive development) principles./.

VNA