Indonesia’s Debt-for-Development Swap Experience: Past, Present and Future
This paper systematically reviews recent experience with debt-for-development swaps in Indonesia, the only debtor country where the number of such operations could warrant its qualification as a genuine government debt relief and development finance policy. First, we show that the 11 swaps Indonesia has signed with its bilateral creditors since 2002 perform rather erratically across four criteria: the increase of resources at the country and/or government budget level; the increase of resources for intended sector purposes; whether, taken together, these swaps ease debt burdens; and the extent of their alignment with government policy and systems. Second, the paper finds little evidence of learning on the Indonesian side. We believe Indonesia can take a more proactive stance in negotiating the economic terms underlying its debt swaps and suggest concrete ways to do so in future swap deals.
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