The Indonesian government is set to provide cash transfers and working capital loans for micro, small and medium-sized enterprises (MSMEs) in its latest bid to boost economic growth amid the Covid-19 pandemic.
Budi Gunadi Sadikin, the head of the national economic recovery task force, last week said the government would provide 2.4 million rupiah ($165) for 10 to 12 million MSMEs, as well as working capital loans of two million rupiah for MSMEs.
“We hope this assistance will maintain people’s income and be used as working capital to support their businesses,” he told reporters during a press briefing. “We will also add working capital loans with low interest for those who have already started businesses.”
The funds may be used by MSMEs to pay for daily needs and to restart business activities, said Budi, who is also the deputy state-owned enterprises (SOEs) minister.
President Joko “Jokowi” Widodo has asked the national economic recovery task force to focus on boosting economic growth in the third quarter this year, as well as to maintain employment and income levels to prevent a recession this year, Budi went on to say.
MSMEs have been particularly hit hard by the economic downturn, as the government expects the economy to grow by one per cent at best or shrink by 0.4 per cent at worst this year. It also forecasts a contraction of around five per cent in the year’s second quarter due to large-scale social restrictions (PSBB) to curb the spread of Covid-19.
The government has allocated 695.2 trillion rupiah to strengthen the country’s virus response and boost economic growth, expanding the fiscal deficit to 6.34 per cent of gross domestic product (GDP).
On the same day, the government also guaranteed working capital loans worth 100 trillion rupiah for labour-intensive businesses to help businesses survive the pandemic.
Minister of Finance Sri Mulyani Indrawati said the loan guarantee programme was expected to boost credit disbursement from banks to businesses.
To be eligible for the government programme, labour-intensive firms are required to employ at least 300 individuals, prove that their activities have been affected by the pandemic and have a good track record of paying back loans, according to the minister.
“We hope the credit guarantee scheme will restore the risk appetite of both banks and firms to help boost economic activity,” Sri Mulyani said. “We will use all of our policy instruments to improve supply and demand.”
THE JAKARTA POST/ASIA NEWS NETWORK