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Debt Conversion Initiative Launched To Fund Health Programs

25 September 2007

Berlin - A debt conversion initiative was launched today which breaks new ground in financing the fight against the world's three most dangerous infectious diseases. The German and Indonesian governments signed an agreement to cancel 50 million Euro of Indonesia's debt on the condition that Indonesia invests half of the freed-up money into national health programs through the Global Fund to Fight AIDS, Tuberculosis and Malaria.

German Development Minister Heidemarie Wieczorek-Zeul, Global Fund Executive Director Dr Michel Kazatchkine, and the Republic of Indonesia's Ambassador to Germany Makmur Widodo, all signed the first "Debt2Health" agreement during a ceremony at the opening of the Global Fund's Donor Conference in Berlin. Germany is the first donor country, to support programs of the Global Fund through debt conversion and has worked alongside the Global Fund to develop the concept and modalities of the Debt2Health Initiative. Indonesia is a pilot country of the initiative.

"Debt2Health is a win-win situation for all: It increases predictability for the Global Fund to do its important work, Indonesia strengthens the health system in the country and Germany lives up to its responsibility in the fight against AIDS, tuberculosis and malaria," Minister Wieczorek-Zeul said. "I am proud that Germany has supported the Debt2Health initiative from the beginning and is now the first donor to participate and make use of it." The Minister pointed out that the funds freed up by Debt2Health will be used in partner countries for health programs and will be additional to existing programs. Over the next four years, Germany will mobilize a total of 200 million Euros for Global Fund health programs through the Debt2Health Initiative.

"Debt2Health goes beyond traditional development financing and the launch today is a significant milestone for the Global Fund," Dr. Kazatchkine said. "The idea behind the Debt2Health initiative is to apply the well-established instrument of debt swaps to financing public health programs using the existing and proven performance-based systems of the Global Fund. A significant number of countries which do not qualify for debt relief through existing multilateral initiatives still spend as much as a fifth of their export earnings on servicing debt while at the same time struggling with high disease burdens. Debt2Health makes it possible for a country to receive economic relief while its citizens benefit from health services. This type of investment in health promises tremendous benefits for all."

In April, the Board of the Global Fund approved a two-year pilot phase for Debt2Health in up to four countries. While Indonesia is the first country to have completed the deal, Kenya, Pakistan and Peru are lined up to benefit from this new financing initiative during its pilot phase.

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