President Prabowo’s commitment at the G20 Summit in Brazil to end dependence on coal-fired power plants within the next 15 years needs to be followed up without delay. The estimated cost of retiring coal-fired power plants through 2050 is Rp444 trillion, while the government’s fiscal space is increasingly constrained, with interest and debt payments next year expected to absorb 45% of the state budget. Against this backdrop, CELIOS is proposing an innovative debt swap scheme so that coal plant retirements can proceed without burdening the state budget.
CELIOS Executive Director Bhima Yudhistira Adhinegara stressed, “Indonesia has Rp94.8 trillion in loans maturing in 2025, owed to advanced economies and multilateral institutions. The Finance Minister and Energy Minister can therefore open negotiations to swap this debt for funds to retire coal-fired power plants. Advanced economies would also benefit by consistently fulfilling their NCQG commitments to pay their climate debt.” Meanwhile, CELIOS researcher Bakhrul Fikri added, “President Prabowo’s ambitious energy transition commitment can be matched with debt swap schemes offered by developed countries. The next step is for the relevant ministries and PLN to promptly issue a roadmap and shortlist of coal-fired power plant units to be retired.”
Although promising, CELIOS has highlighted several challenges that need to be mitigated in implementing debt swaps. Past experience shows that the amount of debt eligible for a swap is often too small. A dedicated team is therefore needed to open serious negotiations with G7 countries and multilateral institutions. “In addition, transparency for communities affected by coal-fired power plants, along with compensation for them, must be included in the debt swap package,” Bhima concluded.
President Prabowo’s commitment at the G20 Summit in Brazil to phase out coal-fired power plants within the next 15 years needs to be translated into concrete action. The estimated cost of retiring coal plants through 2050 is around IDR 444 trillion, while the government’s fiscal space is narrowing—next year, debt service is expected to consume 45% of the state budget. Against this backdrop, CELIOS is proposing an innovative debt swap scheme to enable a gradual retirement of coal plants without straining public finances.
CELIOS Executive Director Bhima Yudhistira Adhinegara explained, “Indonesia has around IDR 94.8 trillion in loans maturing in 2025, owed to advanced economies and multilateral institutions. This opens the door for the Finance Minister and Energy Minister to negotiate swapping that debt for coal plant retirement funds. Advanced economies would also benefit by meeting their NCQG commitments to pay their climate debt.” Meanwhile, CELIOS researcher Bakhrul Fikri added, “President Prabowo’s ambitious energy transition target can align with debt swap schemes offered by developed countries. The next step is for relevant ministries and PLN to issue a roadmap and shortlist coal plants slated for early retirement. CELIOS research has identified at least 19 PLN-owned plants that could be included, such as Suralaya, Paiton, and Ombilin.”
Still, CELIOS highlights challenges in implementing a debt swap. Past experiences show that the volume of debt eligible for swaps is often too small to make a real impact. A dedicated negotiation team with G7 countries and multilateral lenders is urgently needed. Bhima emphasized, “Beyond the financial mechanics, transparency for affected communities and proper compensation must be built into any debt swap package.”