The World Bank has approved a total blended finance package of USD 2.13 billion to support Indonesia’s efforts to achieve high-income status by 2045. The financing comprises two major programs aimed at fostering economic growth, job creation, and expanding access to clean energy throughout the country. 

The first initiative, titled the Indonesia Productive and Sustainable Investment Development Policy Loan, allocates USD 1.5 billion for wide-ranging policy reforms. According to a World Bank statement released on Monday, the program aims to strengthen the country’s financial sector by promoting digital financial services, removing credit infrastructure barriers, and expanding capital markets. It also focuses on climate resilience, including adaptation to natural disaster risks. 

The program will also address regulatory constraints in renewable energy development. Specifically, it seeks to reduce local content requirements that hinder renewable energy procurement and align industrial estate regulations with international environmental and climate standards. Implementation responsibilities lie with the Office of the Coordinating Economic Minister, with the government expected to apply for disbursement by December 2026. 

The second component, known as Indonesia Sustainable Least-Cost Electrification-2 (ISLE-2), is valued at USD 628 million. It aims to bring electricity to more than 3.5 million people and enable the integration of 540 megawatts of solar and wind power into Indonesia’s energy grid. The financing includes a USD 600 million loan from the International Bank for Reconstruction and Development (IBRD), USD 12 million in grants from the IBRD Surplus-Funded Livable Planet Fund, and USD 16 million in additional grants mobilized under the Sustainable Renewables Risk Mitigation Initiative (SRMI). 

“This energy program is also the first to pilot the World Bank's step-up loan product, whose financing structure offers Indonesia favorable interest rates for nine years with built-in incentives to attract private capital over time,” the Bank stated. The mechanism includes lower interest rates during implementation and the possibility of reducing loan costs through refinancing upon project completion. 

According to the World Bank, the ISLE-2 project is expected to reduce electricity generation costs by at least 8 percent and greenhouse gas emissions by 10 percent, particularly in the Kalimantan and Sumatra regions. State electricity firm PT PLN will serve as the implementing agency and must apply for disbursement by April 29, 2032. 

Manuela V. Ferro, Vice President for East Asia and the Pacific at the World Bank noted, “The reforms and investments we are supporting with this blended finance package of over USD 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.” 

The World Bank also announced that the financing package is expected to mobilize an additional USD 345 million in private investments to further support solar and wind projects in Indonesia.