T

he government launched a retail sukuk (sharia-compliant debt paper) on Thursday, aimed at reaping Rp 25 trillion (US$1.85 billion) to Rp 30 trillion as part of its effort to decrease the state budget deficit.

The notes, dubbed SR-008, offer a yield of 8.3 percent per year to be paid on a monthly basis at a fixed amount. The sukuk, which has a three-year tenure, is tradable after a one-month holding period.

The government is offering the notes from Feb. 19 to March 4 and will issue the sukuk on March 10. The public can buy the notes with a minimum purchase of Rp 5 million and a maximum of Rp 5 billion, per ID card.

Finance Minister Bambang Brodjonegoro said retail sukuk and issuing bonds were options the government had for recovering state budget deficit.

'€œHowever, the yield may decrease in accordance with a lower interest rate,'€ he said during the launch of the sukuk.

Bambang said the yield being offered was more attractive than those of time deposits, which ranged from 7 to 8 percent.

The minister said the government would have to lower the yield as it wanted the public to see the instrument as attractive not only because of its yield but also as an investment alternative.

'€œA high yield will be a burden on the state budget,'€ he said, adding that the government would regularly issue affordable retail bonds and sukuk in a bid to increase people'€™s ownership of debt paper.

Currently, 39 percent of the government'€™s debts are kept by foreign investors, thus sudden reversal or outflow risks always linger, Bambang said.

Data from the Finance Ministry'€™s financing and risk management directorate general shows that the government'€™s total outstanding securities amount to Rp 2.44 quadrillion as of Feb. 18. Of that, total Islamic debt securities account for Rp 41.78 trillion.

Finance Ministry'€™s financing and risk management (DJPRR) director general Robert Pakpahan was upbeat that the sukuk would receive high demand from investors.

'€œThe selling agents have said they could sell up to Rp 43 trillion worth,'€ he told a press briefing on Thursday.

As many as 20 banks and six securities companies will act as selling agents. The banks are state-owned lenders Bank Mandiri, BNI, BRI and BTN and private lenders BCA, OCBC NISP and Bank Danamon. The securities companies include Bahana Securities, Danareksa Sekuritas and Trimegah Securities.

BRI director Haru Koesmahargyo was confident his firm could fulfill the sales target of Rp 1.08 trillion set by the government.

'€œWith a lower interest rate, many branches and priority services, I think we can fulfill the target before the offering period ends,'€ he said.

OCBC NISP sharia business head Koko T. Rachmadi expressed similar optimism, saying that the yield would lure investors as Bank Indonesia'€™s interest rate lowered.

Indonesian debt papers always sell like hot cakes. The first debt paper sale in 2016 attracted Rp 26.2 trillion in incoming bids, far exceeding the target of Rp 12 trillion.