JAKARTA (TheInsiderStories) – The Government has set in motion a plan to issue sovereign bonds in two foreign currencies (dual currency), following the successful issuance of global and euro bonds this year, according to Finance Ministry senior official Loto Ginting.
Ginting said sovereign bonds denominated in United States dollars (US) and Euros are expected to be launched in the middle of next year, after taking into account the fact that the dollar exchange rate is cheaper than that of the Euro.
“In terms of cost, the Euro is relatively (higher) compared to US dollar,” she told TheInsiderStories.
Issuing dual currency bonds is another government effort to resolve the State Budget deficit set in the 2018 APBN of Rp325.9 trillion or 2.19 per cent of Gross Domestic Product (GDP).
The financing strategy in 2018 is aiming at meeting optimal financing cost and risk levels, supporting the development of financial markets, and improving transparency and accountability of management of financing policies.
The Indonesian government aims to issue a net sum of Rp414.5 trillion (U$30.67 billion) in debt next year, some of which will be issued in foreign currencies.
The need for debt financing in 2018 amounted to Rp783.2 trillion, about 93 per cent or Rp727.6 trillion of which will come from government bonds, while the remaining 7 per cent or Rp55.8 trillion will derive from loans.
The need for debt financing of Rp783.2 trillion is as follows: Rp586.6 trillion is domestic debt or 75 per cent consisting of domestic sovereign bonds, Rp 582.1 trillion and domestic loans, Rp4.5 trillion plus SPN due in 2018, amounting to Rp 119.0 trillion.
Foreign currency debts amounted to Rp196.6 trillion or 25 per cent, consisting of foreign exchange SBN of Rp145.3 trillion, and foreign loans Rp51.3 trillion in US$, Japanese yen and Euros.
Rating agency Standard & Poor’s upgraded Indonesia’s sovereign rating to ‘investment grade’ in May this year. Two other major rating agencies had already rated Indonesian debt at investment grade.
David Sumual, an economist with private lender PT Bank Central Asia, sees foreign capital inflow as still fueling emerging markets, including that of Indonesia, following moderate outlook for any Federal Reserve rate increase.
Against this, a mixed message from the Euro Central Bank, indicating how they will undertake quantitative easing (government bonds, mortgage debt securities purchases); this will likely exert a lighter effect than any US decision.
Written by Elisa Valenta, email: firstname.lastname@example.org