World Bank Approves US$2.1bn Investment Package for Indonesia; Here's the Detail

TEMPO.CO, Jakarta - The World Bank has approved two major investments with a total blended finance package worth US$2.128 billion, or roughly about Rp34 trillion to create jobs, boost economic growth, and improve access to clean energy across Indonesia. These two projects represent the World Bank's first steps to support Indonesia's ambitious target to achieve high-income status by 2045.

The first investment consists of a policy reform program worth US$1.5 billion, called the Indonesia Productive and Sustainable Investment Development Policy Loan. This program aims to strengthen Indonesia's financial sector by expanding the use of digital financial services, removing barriers in credit infrastructure, developing the capital market, and adjusting to climate and natural disaster risks.

In addition, this program will facilitate the adoption of renewable energy technology by reducing local content requirements, adjusting industrial estate policies to international environmental and climate standards, and implementing land value capture mechanisms to attract private investment in infrastructure development.

As a complement to these policy reforms, the second project comprises the Sustainable Least-Cost Electrification-2 (ISLE-2) blended finance program. This project is intended to expand energy access for 3.5 million people, and build the capacity of solar and wind power plants by 540 MW. The program aims to reduce power generation costs by at least 8 percent and cut greenhouse gas emissions by 10 percent in Kalimantan and Sumatra.

The project funding comes from a blended finance package, including a US$600 million IBRD loan, a US$12 million grant from the IBRD Surplus-Funded Livable Planet Fund, and an additional US$16 million grant from partners in the Sustainable Renewables Risk Mitigation Initiative (SRMI).

Financing also includes a US$6 million grant from the UK through the Energy Sector Management Assistance Program (ESMAP) and US$10 million from the Green Climate Fund SRMI-2.

This program also marks the first project to utilize the World Bank's step-up loan product scheme, which provides low interest rates for nine years and incentives to attract private investment. This scheme offers lower interest rates during project implementation and the potential for loan cost reduction through refinancing after project completion. This approach aligns with the World Bank's strategy known as Originate to Distribute.

"The reforms and investments we are supporting with this blended finance package of over US$2 billion will help implement key government priorities and advance the Bank’s own goals to create jobs and advance energy access in one of the largest and most dynamic economies," said Manuela V. Ferro, World Bank Vice President for East Asia and Pacific, as quoted from the World Bank official website.

Through blended finance instruments, the World Bank and its partners will also encourage an additional US$345 million in private investment for solar and wind energy projects as part of a regional energy program aimed at building a robust and interconnected national and regional electricity network.

Through the ISLE-2 Project, the World Bank continues to help Indonesia achieve universal electricity access in the most cost-efficient manner. “With over 3.5 million people gaining access to electricity, the operation is projected to catalyze improved livelihoods and creation of more and better jobs—including through electrification of female-headed enterprises," said Carolyn Turk, World Bank Division Director for Indonesia and Timor-Leste, June 16, 2025.

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