Italy has approved an agreement initiated in 2005 with the Indonesian government to finance seven projects in Aceh under a bilateral debt swap deal.
The seven projects, worth more than Rp 150 billion (US$13.6 million), include the construction of a fishing port, three irrigation systems and two roads, and a Rp 49.96 billion incentive support contribution to a government poverty alleviation scheme called Hopeful Family Program (PKH).
"The approval has showed Italy's commitment to help Indonesia in particular on its Aceh reconstruction program," a deputy to the Coordinating Minister for the Economy, Mahendra Siregar, said on Friday.
Under the 2005 agreement, Italy would scrap $24.2 million and 5.7 million euro ($7.8 million) of Indonesia's debt within five years by financing the country's reconstruction projects in Aceh, still recovering from the devastating 2004 tsunami.
It has so far eliminated $5 million and 10.74 million euro by financing ten projects during the 2006-2008 period.
"We appreciate (the efforts of) the Indonesian government as it could complete the projects as expected in more or less three years," Italian Ambassador for Indonesia Roberto Palmieri told The Jakarta Post.
A debt swap scheme allows a country to shift budget allocations which should be used to pay foreign debts over to financing other activities, with approval from the lender.
Such activities may include infrastructure construction, health and education projects, or social empowerment programs.
After Italy, Mahendra said the ministry planned to conclude more debt swap agreements this year with Australia and the United States.
According to Mahendra, Australia has committed to swap AUS$75 million ($52.9 million) of Indonesia's foreign debts by financing programs aimed at handling and preventing AIDS, tuberculosis and dengue fever.
Meanwhile, the United States has offered Indonesia a $19.6 million debt swap under a Tropical Forest Conservation Act. "We also have been in negotiation with Germany to swap a 20 million euro debt," Mahendra added.
Germany had earlier swapped 143.56 million euro of Indonesia's debts through six debt swap agreements.
Although these debt swaps will only cover less than 1 percent of the country's total debts, this still helps Indonesia to reduce its obligations to pay installments on foreign debt.
Earlier this week, Finance Minister Sri Mulyani Indrawati announced the country's foreign debt stood at $30.7 billion, as of the end of 2008.
Of this, $13.4 billion will be due for payment later this year, including $1.6 billion in interest. (hwa)
