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Govt front-loads debt issuance ahead of expected rise in interest rates
In anticipation of higher interest rates in the second half of this year, the government has brought forward the planned issuance of bonds.
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Finance Minister Sri Mulyani Indrawati (left) submits the final draft of an omnibus bill on the financial sector to House of Representatives Speaker Puan Maharani during a plenary session in Jakarta on Dec. 15, 2022. The House has passed the bill into law. (Antara/Hafidz Mubarak A)
T
he government has stepped up its debt issuance as it believed it would have to pay higher interest were it to wait until later in the year to offer the bonds.
This comes as high inflation rates in many countries have compelled central banks to lift benchmark rates, thereby raising the cost of funds for corporate and government borrowers alike.
As of February, the Indonesian government has issued Rp 177.7 trillion (US$11.5 billion) worth of debt so far this year, marking a 162 percent surge from the Rp 67.7 trillion issued in the same two-month period last year.
Finance Minister Sri Mulyani Indrawati explained on Wednesday that the surge was deliberate, as the government was anticipating higher interest rates in the second half of this year.
“We are trying to seize the opportunity [to issue debt]. Before interest rates see another hike, we conduct the issuance,” Sri Mulyani told reporters during her ministry’s monthly press briefing in Jakarta.
Read also: Govt to save more than $12.8 billion to finance 2023 spending
Sri Mulyani went on to note that there was currently a high degree of uncertainty in global markets, driven by the protracted war in Ukraine and stubbornly high consumer price pressure in many countries.
