Indonesia, Germany agree on debt rescheduling, swap

The Jakarta Post, Jakarta

The Ministry of Finance will sign on Wednesday agreements with the German government-owned financial firm Kreditanstalt fuer Wiederaufbau (KfW) on debt rescheduling, a debt swap and a new loan for radio transmission equipment.

Jens Clausen, director of the KfW office in Jakarta, said in a statement on Tuesday that under one of the agreements, KfW would reschedule the repayment of 106.7 million euros (approximately US$104.6 million) in official development assistance (ODA) provided by the German government to the Indonesian government.

This amount includes 88.6 million euros in principal debt and 18.1 million euros in interest, which originally was to fall due by the end of 2003.

Under the 10-year rescheduling agreement, the amount has to be repaid within 10 years starting from December 2013.

The debt rescheduling agreement was a follow-up on a memorandum of understanding signed by the Indonesian government and creditor nations grouped in the Paris Club in April this year.

"This is a contribution to alleviate the financial pressure on the Indonesian government's budget," Clausen said.

The agreement will also contain a debt-swap scheme, which will allow Indonesia to reduce the debt by 23 million euros by implementing poverty-alleviation projects worth the rupiah- equivalent of 11.5 million euros, or 50 percent of the swapped debt.

The social programs, which have to be kept in place until May 2013, have to be agreed upon by both parties, Clausen said, adding that it was indicated that an HIV/AIDS prevention project might be proposed.

According to Clausen, this is the second German debt-swap agreement for Indonesia.

The first agreement, worth 25.5 million euros, was offered by the German government through KfW in November 2000, with the purpose of improving science education at primary schools in Indonesia. The so-called "debt swap for education" will be implemented by early 2003.

Also to be signed Wednesday is a mixed soft-loan agreement worth 15 million euros for the modernization and expansion of the FM broadcasting network of the state-owned radio station RRI in the capitals of the country's less developed provinces, which are categorized by the radio station as "Regional I".

The soft loan is aimed at enabling RRI to better and more reliably deliver its broadcast programs to rural populations.