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Jakarta Post

Government to offer bonds worth $57.1b until year-end

  • Adrian Wail Akhlas

    The Jakarta Post

Jakarta   /   Thu, April 30, 2020   /   07:21 pm
Government to offer bonds worth $57.1b until year-end Finance Minister Sri Mulyani (left) together with Tourism and Creative Economy Minister Wishnutama leave a Cabinet meeting at the Bogor Palace, West Java, on February 11. (Antara/Sigid Kurniawan)

The government will offer Rp 856.8 trillion (US$57.11 billion) worth of government bonds from the second quarter through to the end of year to finance a widening budget deficit and to combat the COVID-19 pandemic.

Finance Minister Sri Mulyani Indrawati said the government would raise the funds through a regular auction in the domestic market, retail bond issuance, private placement and a foreign exchange bond issuance. The government has raised Rp 221.4 trillion worth of bonds in the first quarter of this year.

“We need to upsize the bond issuance to finance the deficit,” Sri Mulyani told House of Representatives Commission XI overseeing financial affairs on Thursday. “We will prioritize credibility and transparency to maintain a good track record in order to capitalize from the market when the opportunity arises.

The government will need at least Rp 1.4 quadrillion in financing this year, including Rp 852.9 trillion to cover the budget deficit, Rp 153.5 trillion for investment financing and Rp 433.4 trillion to pay for maturing government debts. The government expects a widening budget deficit of 5.07 percent of GDP, much higher than its previous target of 1.76 percent.

“With the rising deficit, budget financing is one of the biggest challenges this year particularly during this abnormal situation,” Sri Mulyani said. The government will look to maximize its nondebt income sources including Rp 70 trillion from an accumulated cash surplus, as well as from an endowment fund.

Furthermore, the government is also planning to raise $6 billion to $8 billion from the World Bank, the Asian Development Bank, the Asian Infrastructure Investment Bank, among other multilateral organizations, Sri Mulyani said. “Their lending rates are not affected by the market so it will provide us with more attractive financing options,” she added.

The government, she went on to say, would also offer government debt papers through private placement to the Deposit Insurance Corporation (LPS) and Haj Fund Management Agency, among others. “We will also issue retail bonds worth Rp 50 trillion to Rp 75 trillion through market mechanisms,” Sri Mulyani said.

Bank Indonesia (BI) will be the government’s last resort to finance its widening budget deficit, she added, as a new regulation now allows the central bank to buy government bonds from the primary market.