Loan Extension for $1Billion to Indonesia

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    Thursday, 12 February 2015

    As Indonesia prepares to shoot two Australian drug-traffickers, Australia announces extension of $1BN loan to Indonesia

    Announced yesterday here.

    Extension of the Loan Agreement between the Commonwealth of Australia and the Republic of Indonesia for a standby loan for A$1 billion

    February 2015

    This document is a national interest statement for the recent extension of the expiry date of the Loan Agreement between the Commonwealth of Australia and the Republic of Indonesia for a standby loan facility of A$1 billion, signed on 19 July 2013. It was tabled in compliance with the requirements of the International Monetary Agreements Act 1947 (Cth.) (IMA Act).
    On 19 July 2013, Australia entered into a standby loan agreement with Indonesia to provide A$1 billion in contingent financing. This agreement is part of a multilateral action to support Indonesia led by the World Bank and including the Asian Development Bank (ADB) and Japan. The agreement was due to expire on 31 December 2014, but this has been extended to 30 June 2015 at the request of the Indonesian Government.
    This is a precautionary facility designed to safeguard Indonesia's economy, and in particular key development expenditures, from the potential impact of increased global and regional financial market volatility, such as that arising from tightening monetary policy in the United States or unconventional monetary policy settings in the Euro area or Japan. Reflecting the purpose of this facility as a financing source of last resort, the loan can only be drawn down if Indonesia becomes unable to fund its budget through sales of Indonesian Government securities without paying excessively high financing costs.
    Australia provided Indonesia access to a similar World Bank-led loan facility to the value of US$1 billion in 2009 to assist during the global financial crisis. This facility was never drawn down by Indonesia, and expired on 31 December 2010.
    Providing this facility to Indonesia enhances Australia's diplomatic and economic interests, through strengthening the important relationship between the two countries, and by supporting the economic stability of Indonesia and the region.
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