The Jakarta Post
The government is considering whether to issue Indonesia’s first-ever diaspora bonds in November to raise money from nationals living abroad as it struggles to finance the fight against the COVID-19 pandemic.
The Finance Ministry's director for government debt securities Deni Ridwan said the government pushed back the date of issuing the diaspora bonds from August to November because of the pandemic, adding that it was currently assessing demand for such bonds.
“Almost all countries need additional financing but demand from the market is limited. Thus, we need creative financing sources including diaspora bonds,” Deni told a discussion forum on Thursday.
The issuance of diaspora bonds was aimed at widening the Indonesian investor base and diversifying existing instruments, Deni said. The target market could include foreign nationals with an Indonesian family background and Indonesians living abroad, among others, he added.
The government is planning to issue a fixed rate three-year tranche of bonds with a minimum order of Rp 5 million (US$352.78) and with a maximum order of Rp 5 billion, he went on to say.
Indonesia’s 2020 budget deficit is expected to swell to about Rp 1.03 quadrillion, 6.34 percent of gross domestic product (GDP), as the government hikes spending on economic stimulus packages and disease prevention to Rp 677.2 trillion.
Debt financing is expected to swell to Rp 1.22 quadrillion this year, versus an initially planned Rp 1 quadrillion, to cover the growing budget deficit.
The country expects to raise Rp 989 trillion from bonds and loans in the remainder of 2020, according to estimates by Finance Ministry Financing and Risk Management Director-General Luky Alfirman in late May. This figure is likely to surge further to cover the growing deficit.
The government also aims to sell samurai bonds, or yen-denominated bonds, in the second half of this year as part of efforts to fund the fiscal gap, Deni said. “We have started to do the preparations for a samurai bond issuance in Japan,” he added.
Mandiri Sekuritas fixed-income analyst Handy Yunianto said the diaspora bonds would have a positive effect in widening the investor base, adding that several other countries such as India had set an example in issuing such bonds.
“We need to look at the potential investors including who could buy the bonds and how much funds they are willing to invest,” Handy told The Jakarta Post. “Expanding the investor base and adding more investment instruments is a good strategy to finance the growing deficit.”
The number of retail investors in Indonesia is on the rise as a result of growing awareness about the importance of investing, despite the market consensus that volatility will continue amid the COVID-19 pandemic.
Mandiri Sekuritas, the country’s most active brokerage house by transaction value, booked 11,000 new customers in the retail segment during the first four months of this year.
Indo Premier Sekuritas, which is also among the most active brokerages on the Indonesia Stock Exchange (IDX), is aiming for a 40 percent increase in customer numbers in the next year after seeing a monthly average of 200 to 300 new customers so far this year.