'Debt swap will do little to ease debt burden'

A'an Suryana, The Jakarta Post, Jakarta

According to economic experts, the debt swap mechanism proposed by the government will contribute little to help reduce the country's huge sovereign debts, but asserted that any measures that could ease the debt burden should be pursued.

"Any step to reduce our debts, however insignificant, must be pursued," Anggito Abimanyu, a staff expert at the Ministry of Finance, told The Jakarta Post on Wednesday.

Anggito added the exact amount of debt reduction achieved via the debt swap proposal would be small.

Earlier on Tuesday, a government official said that eight creditor countries had agreed to Indonesia's debt swap proposal, while seven other nations were still either studying the proposal or had completely rejected it.

The eight countries are Canada, Finland, France, Germany, Italy, New Zealand, Sweden and the United Kingdom. So far, only Germany has explicitly disclosed a figure of around US$22.7 million debt reduction if the government could provide funds half that amount for environmental protection, education and poverty alleviation.

The amount is very small compared to the country's sovereign debts of around $70 billion. If combined with domestic debts, total public debts amount to $132 billion.

Four countries -- Australia, Denmark, Japan and South Korea -- have rejected the debt swap proposal. Three other countries remain undecided over the proposal.

Anggito said the agreement was still a broad agreement, while the terms, programs and other details would be discussed bilaterally with the respective countries in the near future.

Separately, Centre for Strategic and International Studies (CSIS) economist Pande Radja Silalahi supported the Indonesian government's efforts to launch the debt swap proposal, but he also urged the Indonesian government to be more creative in executing the proposal.

He said it was important for the government to fully understand the preference of each creditor nation to be able to win approval.

"The Indonesian government must understand the preference of creditor countries. This will make it easier for the proposal to be accepted," he said.