World Bank Lowers Interest Rates IBRD Important Step in to Support Middle income countries: Indonesia will Getting Large gains, "said Representative (

Jakarta, 2 October 2007: Board of Executive Directors of the World Bank last week approved the simplification and a decrease in loan interest loans huge burden in the country for 79 low-income and middle feasible to get a loan, including Indonesia, which is the client's shareholders and the International Bank of Reconstruction and Development (IBRD). The decrease is a response to requests from countries borrowers who want to get World Bank financing more competitive and meet the commitment made at the Annual Meetings in September 2006 in Singapore.

Interest rate on new loans has been much simplified - to change the cost structure of a complex form of the previous cost in advance, of the loan, commitment fees, and the risk premium - a simple structure with the cost in advance and decline of interest rates. Cost commitment paid countries after they signed and before receiving the loan has been removed along with the elimination of the sometimes offered to reduce the financial burden. This has increased the transparency of the process of the loan.

How do these reforms will help Indonesia? IBRD loan previously given to middle-income country in about 30 bps (basis points) above the London Interbank Offered Rate (LIBOR) for the Variable Spread Loan. With the new pricing structure, IBRD Variable Spread Loans will be provided on the interest rate equivalent to LIBOR. So, if Indonesia will borrow U.S. $ 100 million, Indonesia will get additional savings of U.S. $ 300,000, saving over the existing loan because the cost of the World Bank under the standard market. The structure of this new pricing will occur for all loans signed on and after the date of May 16, 2007.

"World Bank Group can become a better partner for middle-income client countries, and this is one of the steps we take to meet the commitment," said Robert Zoellick, President of the World Bank Group, in a press release in Washington. This step is implicitly recognize number of financing options available to the country-and middle-income countries highlights the cost advantages in taking a loan from the World Bank. Middle-income countries such as Indonesia - is defined by the World Bank as countries that have per capita income between U.S. $ 1,025 and U.S. $ 6,055 for the years 2007 - IBRD loans for projects in the social sector, infrastructure and other areas. IBRD loan to Indonesia is usually given for 20 years with a grace period of 5 years.

"Job creation of employment infrastructure and poverty reduction efforts can help raise the welfare of around 17.75 percent of the Indonesian people who live below the poverty line," said Joachim von Amsberg, World Bank Chief Representative to Indonesia. "Interest rate on new loans for Indonesia is very interesting because we lower the interest rate on debt financing from international capital markets become increasingly expensive for Indonesia."

Along with the markets of developing countries increasingly wide fluctuation in connection with the capital market recently, the level of funding for Indonesia has increased in recent months, while the rate of loans from the World Bank remains stable. With the decrease of interest rate margins, the benefits received from the World Bank in Indonesia compared to the international capital markets will be increased.

In fiscal year 2007, the World Bank to plant investment in Indonesia U.S. $ 1:16 billion for 28 projects in the sectors of infrastructure, health, education and community-based development, with U.S. $ 771 million came from IBRD and U.S. $ 389 million is interest-free loan from the International Development Agency ( IDA). This amount reached 6 percent of the total loans in Indonesia this year. In addition, the World Bank manages U.S. $ 1:05 billion Trust Fund for reconstruction of the disaster, support decentralization, and the delivery of public services for the poor.

See table below:

World Bank Lending to Indonesia in FY07


To get more information about the loan and the World Bank assistance to Indonesia, visit: http://www.worldbank.org/id

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