T

he government is looking to increase the proportion of its foreign-denominated (forex) debt paper issuance in 2016 compared with this year.

Robert Pakpahan, director general of the Finance Ministry'€™s financing and risk management office (DJPPR), said his office expected to boost the proportion to 30 percent of total gross bond issuance, an increase from around 24 percent in 2015.

'€œWe want to avoid crowding out the domestic market by issuing more forex bonds,'€ he said at a media briefing on Saturday. Crowding out occurs when the government'€™s substantial presence in the market affects the market itself.

In 2015 alone, the government generated more than Rp 350 trillion (US$25.83 billion) from the domestic market, a significant figure that has soaked up market liquidity according to many analysts.

Robert said the decision to increase the forex bond proportion would help the government reduce volatility caused by exchange rate fluctuations as well.

'€œNo matter how sharply the rupiah fluctuates, it will not affect our bonds because they will be in foreign denominations.'€

'€œAt the same time, proceeds from the issuance can be used as additional forex reserves at Bank Indonesia,'€ he added.

By targeting a proportion of 30 percent, next year'€™s forex bonds are expected to reach an equivalent of Rp 152.81 trillion, using the current exchange rate, up from an equivalent of Rp 112.87 trillion in 2015.

The total gross bond issuance itself is set at Rp 509.38 trillion for next year.

Robert said the government was looking into the possibility of issuing new forex bond types, such as renminbi-denominated, in addition to those it has already issued.

The government has so far sold US-dollar bonds in the global and domestic markets, US-dollar global sukuk (Islamic bonds), euro-denominated bonds in Europe and samurai or yen-denominated bonds in Japan.

Robert said the government was open to the option of issuing non-guaranteed samurai debt papers again, as it did in 2015.

It issued Rp 100 billion-worth of yen-denominated bonds in August, the fourth issuance since 2009. However, this year'€™s issuance was the government'€™s first attempt at offering partially non-guaranteed debt papers '€” amounting to Â¥45 billion '€” to investors.

All the previous three issuances were guaranteed by the Japanese Bank for International Cooperation. '€œThe non-guaranteed bonds were apparently well received by investors,'€ Robert added.

The government is also planning to involve more local, retail investors by increasing the frequency of retail bond (ORI) and sukuk retail bond offerings in 2016, to two offerings each from only one at present.

The ORI was offered twice within a year back in 2007 and 2008, while offerings of the sukuk retail have always occurred just once a year.

Meanwhile, data from the DJPPR show that it is close to achieving all of its gross issuance target in 2015.

As of Nov. 5, it had already raised Rp 456.28 trillion or 98.8 percent of the target.