JAKARTA (InsiderStories) - Indonesian government sold US$2.5 billion of global sharia bonds on Tuesday. The government sold $750 million of 5-year sukuk with a coupon at 3.4 percent, while the coupon it will pay for the $1.75 billion 10-year sukuk was set at 4.55 percent.
Last year, the country issued its fifth offering of global syariah-compliant notes with worth $2 billion of dollar Sukuk due in 2025 with coupon rate of 4.325 percent and received bids totalling US$6.8 billion.
“The coupon is higher than last year because the situation is different - the Fed has raised its rates once. In general, we are happy with the pricing,” said Robert Pakpahan, the finance ministry’s director general of financing and risk management by adding there were $8.6 billion of incoming bids for the two tranches of bonds.
Pakpahan said the country initially wanted to get $2 billion from the sukuk issuance, but upsized it because of high demand from investors. Indonesian bonds have drawn a net $3.1 billion of investment this year.
This year, Indonesia plans to issue government bonds worth up to Rp 530 trillion to finance 2016’s State Budget deficit. Budget deficit in 2016 is estimated at 2.15 percent or worth around Rp 273.4 trillion of total gross domestic products (GDP).
Pakpahan told The Insider Stories around 30 percent of total issuance or around Rp159 trillion will be in foreign exchange denomination bonds such as U.S dollar, Euro, Yen and possible in China’s Yuan.
“Out of total Rp 159 trillion, 80% will be in conventional bonds and the remaining 20% will be in global SUKUK, or equals to Rp 30 trillion. It is yet to be decided the composition of bonds in U.S, Euro, Yen and other currencies,” he said.
Robert stated that budget deficit for 2015 is expanded to 2.23 percent of GDP from initial target of 1.9 percent as tax revenues are expected to be below target. To finance the deficit, he said, the government has secured loan commitment from multilateral agencies. (*)