Second Development Policy Loan

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This is the Second Development Policy Loan (DPL) Project within a series of programmatic DPLs to support key priorities of Indonesia's medium-term growth, and poverty reduction program. The project consists of a single tranche operation, based on up-front, completed actions that demonstrate substantive progress toward medium-term objectives. It builds on, and deepens the cross-cutting reforms undertaken under the first DPL operation, and sets out mutually agreed upon triggers for the upcoming third DPL. Key benefits include: 1) Progress toward government's medium-term objectives of a) macroeconomic stability and creditworthiness; b) improved investment climate; and, c) public financial management. 2) Sustained Bank engagement in policy dialogue with the Government on the direction and content of, and strategies for, its economic, structural, and institutional reform agenda. 3) Donor harmonization (the Bank, Government of Japan, Asian Development Bank) around a common policy framework and dialogue. 4) Critical signaling effect and key endorsement by donors of the Government's sound economic management and policy implementation. However several risks exist, that is, a worsening economic volatility, rising interest rates, increased social tensions, fiduciary and reputation risks, deteriorating external environment, and the growing fears of a bird-flu epidemic.