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SOEs to move away from US dollar debt, plan shorter-term debt
Indonesian state-owned enterprises (SOEs) are bracing for the impact of further US Federal Reserve interest rate hikes, which would make their financing more difficult and costly, prompting the government to find new options.
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State-Owned Enterprises (SOEs) Minister Erick Thohir (left) and SOEs Deputy Minister Kartika Wirjoatmodjo (right) attend a working meeting with House of Representatives Commission VI in Jakarta on July 15, 2020. (Antara/Galih Pradipta)
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ndonesian state-owned enterprises (SOEs) are bracing for the impact of further United States Federal Reserve (Fed) interest rate hikes, which would make their financing both more difficult and more costly, prompting the government to look for ways out.
The SOEs Ministry has devised two key ways for state firms to cope with the threat, namely moving away from the US dollar for foreign bond issuance and shifting to shorter-term financing, preferably through domestic banks.
Deputy SOE Minister Kartiko Wirjoatmodjo said on Wednesday that the ministry was considering a switch to bonds denominated in the euro Japanese yen, Chinese yuan or other currencies.
Those currencies were on a depreciation trend against the rupiah, he said, adding it could make them a viable option for more affordable financing as the US dollar became more costly.
“So, we were having thoughts to look for financing sources from other currencies. We were reviewing to reduce our exposure to the US dollar,” Kartiko told reporters after a press conference held by the ministry.
Read also: Indonesian firms look inward for financing as global volatility runs amok
The US dollar is the largest source of foreign-currency financing for Indonesian corporates, accounting for 88 percent of total external debt at $206 billion, according to Bank Indonesia.
