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This is How Indonesia Does Green Financing as well as Handling Covid-19

Jakarta, 09/10/2020 MoF - Minister of Finance Sri Mulyani Indrawati spoke at the 7th OECD Forum entitled 7th OECD Forum on Green Finance and Investment "Green Recovery and Meeting Environment Objective in Developing Countries-Challenges from Covid-19".

"How can we finance it, especially in this very volatile and difficult global situation? We are fortunate that one of our Green Bonds issued during this volatile period is able to collect 715 million June yesterday at the lowest point of the world condition of the Green Global Bond market," she said.

At the same time, Indonesia is also working with the Central Bank (BI) to share the burden (burden sharing) while respecting its independence and long-term monetary policy to maintain stability.

On the spending side, because the threat of Covid-19 concerns the safety of the community, so it makes it the first priority. So, it has been allocated to respond to the spread of Covid-19 by providing hospitals, protective gear, tool kits, test kits and others related to Covid. But Indonesia, the health issue is not only about Covid, but also Indonesia also continues to strive to overcome stunting, TB (Tuberculosis), etc.

Social spending (bansos) is the largest expenditure, because the bottom 40% of people lose their jobs so they need to be given additional social support. It is spending that had to be given right away.

Then, with a green agenda related to climate change which costs are competing with Covid-19 handling, Indonesia is not canceling green infrastructure projects, but only postponing them because the funds have been refocused on spending on handling Covid-19.

"Is the green agenda of climate change competing? Several infrastructure projects have been postponed because we are trying to refocus our spending. But that does not mean we cancel it. We are delaying to give some space during this fiscal year, especially for Covid spending and the impact is limited," she explained.

Minister of Finance further explained, for some expenditures which maturity can be extended above year 2020, they will be continued in 2021.

"That's how we manage limited fiscal trade-offs while we prioritize Covid handling. We are only delaying, not canceling. Because according to our experience during the 1997-1998 Asian crisis or the 2008-2009 global crisis, when the government canceled the project, the jump start cost is bigger. So, we ask the ministries/agencies (K/L) related to the use of Green Financing, the project to be extended, for example in the beginning it can be completed in 12 months, we asked to 24 months. So it will continue, not stop," she said.

The Minister of Finance even explained that Indonesia has a type of financing that allows K/L to have labor-intensive projects that create jobs related to the green agenda. For example, replanting forests (reforestation) as one of the National Economic Recovery (PEN) programs.

"We hope that Indonesia can recover. So, we are directing some economic recovery to create jobs and at the same time address environmental issues. These are all areas that we are pushing for, especially in the last quarter of 2020 in overcoming Covid by maximizing limited fiscal at the same time. We use global financing and Central Bank financing prudently. Then we give a signal to the ministries / agencies and the Regional Government that they can continue projects or activities that can restore their economy but still adopt health protocols," she concluded. (nr / ds)