Indonesia, Germany to sign US$60m debt swap deal
Indonesia, Germany to sign US$60m debt swap deal
The Jakarta Post, Jakarta
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.