Moody's Investors Service has assigned Baa2 ratings to the proposed senior unsecured US Dollar notes to be issued by the Government of Indonesia (Baa2 stable) - Photo by the Ministry Office

JAKARTA (TheInsiderStories) – Finance minister of Indonesia has sold Rp62.62 trillion (US$4.04 billion) of sovereign bonds in private placement, said the ministry today (04/28). The government also is in talks to borrow around $750 million more from several development banks to fight the COVID-19 outbreak.

The notes have three series, namely FR0084 (tenure six years) with total amount Rp37.88 trillion, coupon rate 7.25 percent, and yield 7.37 percent. FR0085 (tenure 11 years) with worth of Rp21.18 trillion, coupon rate 7.75 percent, and yield 7.86 percent. Then, VR0033 (tenure 5 years) about Rp3.57 trillion with coupon rate 4.54 percent and yield 100 percent.

The ministry has announced to raise the state bonds issuances around Rp999.6 trillion in this year, from the initial targets Rp389.4 trillion. Nearly Rp450 trillion will releases as “pandemic bonds” and the regular bond sales target raises by Rp160.2 trillion to Rp 549.6 trillion to address the widening of the budget deficit.

“The government’ first line of financing will come from an endowment fund and surplus cash but it will not be enough. Therefore, we need to issue government bond to look for the best financing sources. We will be very careful in navigating these uncharted waters,” said finance minister, Sri Mulyani Indrawati in April 7.

Under the new Government Regulation in Lieu of Law Number 1 of 2020 issued last week, BI is now permitted to buy government bonds in the primary market if the market not absorbs the state bond. THe minister, assured the government will be very transparent to maintain the credibility of the country’ fiscal and monetary policies.

So far, the central bank has purchased Rp172.5 trillion in government bonds, including Rp 166.2 trillion from foreign investors in the secondary market. Since early 2020, the financial markets have been hit by the virus outbreak, with foreign investors having sold Rp148.76 trillion in Indonesian assets, including Rp135.08 trillion in government bonds and Rp 9.71 trillion in stocks, BI data shows.

“For Indonesia, at this time, our scenario the economic growth could dropped at 2.3 percent. This is the impact of the most severe COVID-19 or the most severe occurred in the second quarter of this year and will probably continue in the third quarter and may start to improve somewhat in the fourth quarter,” she adds.

The impact of the pandemic made many countries combine policies to deal with virus and a large economic stimulus. This is caused by the escalation of its spread which also has an impact on global economic growth and Indonesia.

“The steps taken by all countries usually consist of fiscal instruments, whether they provide tax incentives a know tax breaks, provide additional spending in general in the field of health and social assistance, and also help the business world including maintaining the financial system so that it does not experience a potential crisis,” said Indrawati.

She continued, her ministry together with BI, Financial Service Agency and Indonesia Deposit Insurance have also carried out forward-looking assessments based on various contingencies or the possibility of being worse than the current or calculated baseline conditions.

Her office will work as much as possible to ensure the availability of the budget to accelerate efforts to overcome this crisis, while maintaining the health and sustainability of the country’s finances through fiscal policy and the National Budget to respond to COVID-19 events by refocusing programs, reallocating budgets and providing stimulus for health goals, protecting the public and business support.

US$1: Rp15,500

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