Indonesia/Germany: Indonesia, Germany to sign US$60m debt swap deal

Indonesia, Germany to sign US$60m debt swap deal

The Jakarta Post, Jakarta, 08 November 2004

The German government will sign on Monday two debt-swap agreements with the Ministry of Finance, leading to a 48 million euros (US$61.81 million) writing off of Indonesia’s obligation to the country upon their implementation.
The first debt-swap agreement will be used to finance the improvement of junior high level education in the eastern part of Indonesia, by constructing 100 new schools in the region. 
The other debt swap will be used to fund several nature conservation projects in Indonesia. 
Monday’s debt-swap agreements will follow the two countries’ first debt-swap deal worth 25.6 million euros in December 2000 for the improvement of primary education, in which Indonesia must spend 12.8 million euros to build 511 learning resource centers in 17 provinces to improve the quality of basic sciences teachers. 
With the three debt-swap agreements, the overall cancellation of Indonesian debt to Germany will amount to 73.6 million euros. Indonesia currently owes some 1 billion euros to Germany. 
The German government has also offered Indonesia another debt swap-deal worth US$400 million for the conservation of what was once peatland in Kalimantan. 
Debt swaps are usually carried out to reduce a country’s debt by requiring the debtor to spend a specified amount of the original debt to finance certain programs that are of concern to the donors. As a consequence, the borrowing country does not have to repay the amount of the debt that is used for these programs. 
Debt swaps are seen as feasible options for the country to reduce its high overseas debt burden as it can no longer seek debt rescheduling via the Paris Club after Indonesia graduated from the International Monetary Fund-sponsored economic reform program. 
Under the Indonesian-German debt-swap scheme, Germany will write off a certain amount of debt after Indonesia spends 50 percent of the renounced amount in rupiah on projects that have been agreed by both governments. 
The implementation of all the projects under the debt-swap deals is monitored by German development bank KfW’s branch in Jakarta. 



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