Indonesian State Banks Support Food Supply with $1.84 Billion Loans

Indonesian State Banks Support Food Supply with $1.84 Billion Loans

On Wednesday (March 13), Head of Indonesia's National Food Agency (NFA),  Arief Prasetyo Adi, announced in parliament that Indonesia's state-owned banks would provide government-backed loans to state-owned food companies (BUMN-BUMN Pangan). This initiative is aimed at ensuring the availability of rice and other food commodities in the face of disrupted harvests due to prolonged dry weather.

State-owned banks are preparing to lend a total of Rp 28.7 trillion ($1.84 billion) this year, of which Rp 6 trillion has already been withdrawn.

The Indonesian government will also subsidize the interest cost of the loans, resulting in an interest rate of 2% if food companies provide collateral for the loans and 3% without collateral.

He explained that the purpose of this program is to encourage food companies to become standby buyers and off-takers of products from local farmers. He also stressed the importance of these loans as some food companies still need financial support.

Bulog and ID FOOD were selected as the companies to receive the loans. They will use the funds to secure stocks of various essential food items such as rice, corn, shallots, chilies, beef, chicken, eggs, sugar, cooking oil, and fish.

Since last year, Southeast Asia's largest economy has been struggling to cope with rising food prices, especially for rice, due to low production caused by the El Niño weather phenomenon.

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