Indonesian Bank to Maintain Benchmark Rate at 6% and Implements Mix-Policy
Board of governor Bank Indonesia (BI) decided cut its 7-Day Reverse Repo Rate (BI-7DRR) 25 basis points (bps) to 4.25 percent, Deposit Facility rate to 3.50 percent, and Lending Facility rate to 5.0 percent, said the governor today (05/18) - Photo: Privacy

JAKARTA (TheInsiderStories)Bank Indonesia (BI) accelerated the issuance and transactions of commercial bond instruments as a source of non-banking short-term funding, said the deputy today (15/17). It aims to encourage domestic demand and support the infrastructure of commercial bonds issuance and transactions.

According to deputy governor of BI Dody Budi Waluyo, by the presence of alternative non-bank financing its expected could boost liquidity in the market if the corporation face specific cycles and need higher cash.

Looking to the scene, the central bank cooperates with Indonesia Central Securities Depository will support the infrastructure of the commercial securities.

To date, there are several regulations that have been issued to support it, including rules of commercial securities and market-supporting institutions. Laterly, there are three arrangers registered, two rating agencies, 46 legal consultants, 84 public accountants, five notaries, four brokers, 15 custodians, and Indonesia Central Securities Depository as the infrastructure of commercial bonds.

The appointment of the institution for the deposit and settlement of commercial securities transactions is one of the efforts to improve governance in issuance and transactions, especially concerning the recording, administration, and settlement of commercial bonds transactions conducted in scripless manner.

Going forward, Bank Indonesia will continue to strive to develop the commercial bonds market through education to attract potential issuers and outreach programs. Bank Indonesia will coordinate with the Financial Service Authority to harmonize regulations of financial service institutions that can use commercial bonds as short-term funding as well as investment.

Meanwhile, the Indonesia government and state-owned enterprises (SOEs) has the potential to issue bonds around Rp100 trillion (US$6.99 billion) in the second quarter (2Q) of 2019. Most of the amount will be in government bond while six SOEs has reported to Indonesia Stock Exchange (IDX) to release obligations around Rp13 trillion.

The six issuer’s bond issuance details are as follows: PT PP Tbk (IDX: PTPP) Rp1.5 trillion, PT Semen Indonesia Tbk (IDX: SMGR) Rp4.9 trillion, PT Waskita Karya Tbk (IDX: WSKT) Rp1.84 trillion, PT Adhi Karya Tbk (IDX: ADHI) Rp2 trillion, PT Waskita Beton Precast Tbk (IDX: WSPB) Rp500 billion, and PT Kimia Farma Tbk (IDX: KAEF) Rp1.5 trillion.

The government estimated will issue a total gross government bond of 50-60 percent throughout the first semester of 2019, which includes retail government bond, foreign exchange government bond, and regular government bond instruments. The total issuance value is around Rp128 trillion.

Historically, the number of government bonds will tend to be stable because after the fasting period and Eid Al-Fitr in May-June, where the number of requests will return high.

Finance Ministry recorded the realization of the net government bonds issuance in the first quarter of 2019 reached Rp185 trillion, and SUKUK issuance reached Rp81.44 trillion so total will be Rp266.44 trillion.

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