JAKARTA (TheInsiderStories) – Bank Indonesia (BI) to buy the state bond through a private placement worth of Rp397.56 trillion (US$27.43 billion) with tenure 5 -8 years as part of the burden sharing scheme to overcome the impact of the pandemic to the economy. The government is also is in negotiating to convert the government debt in US Dollar denomination to Euros and Yen.
“This July we hope that there will be a publication for the benefit of burden sharing related to public goods,” said Director General of Financing and Risk Management at the Ministry of Finance, Lucky Affirman, in a virtual statement today (24/7).
This scheme, he added, had been agreed through a Joint Decree between the two institutions. For the second semester (2H) 2020, he explained, the Indonesian government still needed external funding Rp904 trillion from the total deficit financing Rp1,039 trillion or 6.34 percent of the total gross domestic product (GDP).
Until 1H 2020, the ministry has issued a total of Rp430 trillion state bonds in denominations of Rupiah and foreign currencies. The government has issued global bonds worth $9.9 billion US Dollar issuance in January and April and global SUKUK in May.
“We will fulfill (funding in H2) through the issuance of R40 trillion retail sharia bond, have issued JPY100 billion of Samurai bonds, then bi-weekly auctions on average Rp40 trillion, and the rest through regular auctions,” said Lucky.
In addition to bond issuance, he continued, the government also financed the 2020 State Budget deficit through a program loan of $1.8 billion and project loans of Rp1.8 trillion. Also, cut the interest expenses by converted high-interest bonds with total amount of $3.8 billion.
“Because the Euro and the Yen are cheap we have converted part of the US Dollar debt into the two currencies worth $ 3.8 billion. At the pipeline there are still $ 7.3 billion,” he said.
Based on Presidential Decree Number 72/2020, the government sets a budget deficit of 6.34 percent of total GDP from initially targeted at 5.07 percent of GDP. To fund the deficit, the government will use government funds, issue domestic and global bonds and allow BI to buy the state bond on the primary market.
Indonesia recorded a budget deficit of Rp257.8 trillion in the first half of this year due to efforts to provide stimulus to reduce the economy hit by the corona virus. In the same period, the deficit was recorded at 1.57 percent of GDP. The government is trying to accelerate the disbursement of stimulus packages worth Rp.695.2 trillion to improve the economy that is “cold” and strengthen the health system against the pandemic.
The ministry reported the state expenditures were at Rp1.06 quadrillion, an increase of 3.3 percent compared to 1H of last year and equivalent to 39 percent of this year’ target. While, state revenues only reached Rp811.2 trillion, or a 9.8 percent drop due to a decrease in tax revenue due to a pandemic.
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