Indonesian government raises US$4.3 billion from the first "pandemic bond" issuance in Asia to fund the 2020 State Budget deficit and the COVID-19 relief, said finance minister today - Photo by the Ministry Office

JAKARTA (TheInsiderStories) – Indonesian government has released government bond with total amount Rp122.5 trillion (US$8.75 billion) or 34.1 percent of the 2019 State budget targets. The funds will used to cover budget deficit in this year.

Finance Minister Sri Mulyani Indrawati reported on Wednesday, the realization deficit until end of January recorded Rp45.8 trillion or around 0.28 percent of Gross Domestic Product (GDP). She said, the front loading strategy in State budget deficit financing considering risk mitigation over global market uncertainty and volatility, utilizing high financial market liquidity in the first quarter.

Indonesia plans to issue government bond around Rp825.70 trillion in 2019. This figure is lower than the amount in 2018 State Budget of Rp885.69 trillion.

The government also continues to find innovative ways of the financing through the issuance of retail bond with online formats or other creative financing models. Issuance of online retail bond is conducted with the consideration of increasing domestic investor participation, in line with the strategy to reducing foreign ownership and foreign currency debt.

Further innovations by the government include providing special access for micro-finance institutions and, Small and Medium Enterprises, philanthropic institutions including waqf fund management through Waqf Linked Sukuk instruments. The government also plans to continue publish Green Sukuk.

Last year, the government has issued sovereign bonds in two foreign currencies US dollar and Euro, following the successful issuance of global and euro bonds in 2017.

According Finance Ministry senior official Loto Ginting, issuing dual currency bonds is another government effort to resolve the 2018′ State Budget deficit. She said, the financing strategy is aiming to meet the optimal financing cost and risk levels, supporting the development of financial markets, and improving transparency and accountability of management of financing policies.

Based on official data, government debt recorded at Rp4,498.56 trillion in January. The figure swelled by 13 percent from the same period last year. The January’s debt holds 30.1 percent of GDP.

Even though the numbers increasing, Indrawati considered the figure is much lower than the limit stated in law at 60 percent. Moreover, the GDP can cover four times of the government’ debt.

It wasn’t done without any consideration, according to her. The government thinks that the front loading can anticipate global uncertainties such as United States-China trade war, Federal Reserves rate policy, and oil price volatility. Moreover, the high securities issuance in the first quarter aims to mitigate the liquidity decline in the second quarter, as an impact of high public expenditure due to election and Eid Al-Fitr.

Indonesian state budget structure deficit got bigger. In January, deficit was Rp45.6 trillion. It is 20.95 percent higher than in the same period last year. The deficit was caused by higher increase of expenditure than revenue.

In January, Indonesia’ State revenues increased by 6.2 percent, while the expenditure hiked by 10.3 percent in January. She noted that the higher deficit was caused by the low revenue realization.

The revenue in January was Rp108.1 trillion or 5 percent target. Meanwhile, the expenditure was Rp153.8 trillion or 6.3 percent target.

She revealed, the State revenues realization was contributed by tax revenue worth of Rp89.9 trillion. The figure is was 5.1 percent higher than the same period last year. But the non-tax revenue was Rp18.3 trillion, lower than before. While, the State expenditure was contributed by the funding transfer to regions that reached Rp77.4 trillion or 10.2 percent of the target.

This period State budget deficit swelling was in accordance with the primary balance deficit increase. In January, the primary balance was negative Rp22.8 trillion, higher than negative Rp14.2 trillion last year.

“From economic growth (amounting to 5.17 percent in 2018), Indonesia still has a positive and strong momentum, while many other countries experience weakness,” the minister said by adding the inflation rate quite stable at 2.82 percent in 2018.

US$1: Rp14,000

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