I'm in Jakarta to attend the ceremony to mark the conclusion of the first 'Debt2Health' swap between Indonesia, Germany and the Global Fund to Fight AIDS, Tuberculosis and Malaria. This innovative new form of development assistance financing involves the creditor (in this case Germany) forgiving a loan (Euro 50 million) owed to it by the debtor (Indonesia).
So far, so simple. But the twist is that Indonesia has then agreed to convert half of the foregone loan (Euro 25 million) into a no-strings contribution to the Global Fund to use in the fight against the three diseases. Indonesia thus benefits from a reduction in its debt burden, allowing more resources to be applied domestically to health and other sectors.
Germany has been very creative in its use of debt swap arrangements. This is the sixth such swap between Germany and Indonesia, totalling now some Euro 143 million. The Jakarta ceremony was presided over by senior minister Aburizal Bakrie. He was highly engaged and supportive of the swaps, as were the senior Indonesian officials at the event. The architect of this deal was Robert Filipp, the Global Fund's head of innovative financing. He told me, and I agree with him, that this new mechanism transforms debt into an investment in health that benefits both sides of the transaction and, of course, the Indonesian people.
