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Govt seeks to cut debt maturities
The Indonesian government plans to shorten the average maturity on its government bonds as offering longer-term notes has raised interest costs to a record, said Robert Pakpahan, director-general at the debt-management office
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he Indonesian government plans to shorten the average maturity on its government bonds as offering longer-term notes has raised interest costs to a record, said Robert Pakpahan, director-general at the debt-management office.
The nation plans to cut the average to eight to nine years because the current 10 years is too 'expensive', Pakpahan said on the sidelines of a conference in Singapore Thursday. Official data shows Indonesia's maturity profile has stretched to 9.9 years, the longest since 2008, Bloomberg reported from Singapore.
The government must pay Rp 121.3 trillion ($10 billion) to service its existing debt this year, a record high and a 7.7 percent increase from last year, Finance Ministry data show. This year's interest cost is 8.3 percent of state revenue, the highest proportion since 2010.
Pakpahan said he plans to diversify issuance to guard against any reversal of funds from emerging markets. The Federal Reserve ended its bond-buying program Wednesday that had pushed down borrowing costs and led to increased appetite for higher-yielding debt in developing nations. The US central bank also signaled it's on course to increase interest rates in 2015, which would boost demand for Treasuries.
The debt chief said the government has a bond-stability framework and crisis management protocol that can be activated 'if there is a sudden movement' in the market. 'We coordinate, and we can always buy back these securities' in case of a selloff, Pakpahan said.
Only about $1.5 billion of the debt has to be refinanced in the offshore market, according to Pakpahan. He said the government is considering refinancing the entire amount at once and will probably look at five-year maturities or at most 10.
'For 2015, the possibility is that I will front-load but only the foreign-currency issuance,' Pakpahan said. 'Domestically, maybe we will do a little bit less in the start.'
