VZCZCXYZ0000
OO RUEHWEB

DE RUEHJA #0333 0570958
ZNR UUUUU ZZH
O 260958Z FEB 09
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 1592
RHEHNSC/NSC WASHDC IMMEDIATE
RUEATRS/DEPT OF TREASURY WASHDC IMMEDIATE
INFO RUEHKO/AMEMBASSY TOKYO PRIORITY 3024
RUEHBY/AMEMBASSY CANBERRA PRIORITY 3603
RUEHGP/AMEMBASSY SINGAPORE PRIORITY 6462

UNCLAS JAKARTA 000333 
 
SENSITIVE 
SIPDIS 
 
DEPARTMENT FOR E, EAP, EEB 
NSC FOR J. BADER AND E. PHU 
TREASURY FOR M.NUGENT AND T.RAND 
SINGAPORE FOR S. BAKER 
 
E.O. 12958: N/A 
TAGS: EFIN ECON EAID ID
 
SUBJECT:  SUPPORTING INDONESIA'S WORLD BANK CONTINGENT FINANCING 
PACKAGE 
 
Sensitive but Unclassified.  Not for Internet Distribution. 
 
¶1. (U) Please see action request in paragraph 6. 
 
¶2. (SBU) The United States should support the proposed $2 billion 
Public Expenditure Support Facility Development Policy Loan 
(DPL-DDO) for Indonesia.  The World Bank Executive Board will 
consider this loan on March 3.  The proposal has been closely 
coordinated with the International Monetary Fund.  Foreign Minister 
Wirayuda personally asked Secretary Clinton to support Indonesia's 
efforts to secure contingency fiscal support. 
 
¶3. (SBU) Indonesia's sound macroeconomic policies have helped it 
weather the global economic downturn and financial market volatility 
to date.  But the downturn is having a growing negative impact on 
the economy.  The World Bank package will signal to the market that 
Indonesia can finance its budget deficit at an affordable rate. 
U.S. support will be seen as a vote of confidence for Indonesia's 
management of the financial crisis. 
 
¶4. (SBU) Indonesia is pursuing prudent fiscal policies, ramping up 
expansionary government spending while simultaneously reducing its 
debt as a share of gross domestic product.  The proposed contingency 
financing reflects Indonesia's deepening cooperation with the World 
Bank, which is providing important policy support in the areas of 
public financial management and investment climate reform.  It is 
also part of a comprehensive approach, leveraging $3.5 billion in 
resources from other key donors (Asian Development Bank, Japan and 
Australia) to provide contingent financing in the event Indonesia is 
unable to access capital markets (its preferred source of 
financing). 
 
¶5. (SBU) U.S. support for this loan is a realistic way to help a key 
emerging economy and G-20 partner manage the fallout from the global 
economic crisis.  It will also provide crucial support for the key 
reformers striving to build sustainable economic growth, reduce 
poverty and combat corruption. 
 
¶6. (SBU) ACTION REQUEST:  Embassy recommends that Secretary Geithner 
call Acting Coordinating Minister for Economic Affairs and Finance 
Minister Sri Mulyani Indrawati prior to the Board vote to inform her 
of the U.S. position.  Sri Mulyani has an impressive reputation as a 
reformer and is a potential ally in the G-20 process. 
 
HUME