The Asian Development Bank (ADB) has approved two loans, adding up to US$1.1 billion, that will help strengthen and round out Indonesia’s energy sector — spurring growth within the country and increasing access to renewable-energy sources.
The first loan is a US$500 million policy-based loan for the Sustainable and Inclusive Energy Program—Subprogram 2. The second loan is a $600 million results-based loan to the State Electricity Corporation (PLN) that will increase access to sustainable and modern energy services in eastern Indonesia.
Winfried Wicklein, ADB country director in Indonesia, said: “Increased access to affordable and sustainable sources of energy is a prerequisite for the government to meet its economic growth aspirations. The two loans approved today will, respectively, improve the enabling policy environment to increase public and private investment in Indonesia’s energy sector, and support and develop the power distribution network in Eastern Indonesia.”
Indonesia’s energy sector has struggled in terms of allowing access to its services, with around 23 million people lacking access to power. Due to the country’s lack of renewable-energy development, more than half of Indonesia’s energy generation in 2016 came from coal.
With these loans, the Indonesian government will look to develop various reforms to improve fiscal sustainability, such as rationalizing tariffs, introduce measures to improve private investment in electricity and gas and support the scale-up of renewable energy and energy efficiency measures.