Finance Minister Sri Mulyani Indrawati said the central bank might bear 100 percent of the coupon rate burden for bonds issued to finance programs that were considered in the public interest, including for health care, social protection and financial support for regional governments. She expected the programs to amount to Rp 397 trillion (US$28 billion).

 “We are currently finalizing with the central bank how many government bonds we will sell to the market and how many we’ll sell through private placement to BI,” Sri Mulyani told lawmakers during a hearing on Monday.

 Earlier this month, she stressed that zero-coupon bonds were not among instruments being discussed by the government and the central bank to be used to step up the country’s response to the pandemic, despite urging by lawmakers.

 The government has been struggling to finance the widening budget deficit, which is expected to reach 6.34 percent of gross domestic product (GDP), much higher than the previous legal limit of 3 percent. An emergency law signed by President Joko “Jokowi” Widodo in April gave a legal basis for the government to widen the deficit beyond the 3 percent limit.

 The government has now allocated Rp 2.74 quadrillion in state spending while state revenue is expected to amount to only Rp 1.7 quadrillion, according to the latest 2020 state budget revision as stated in Presidential Regulation (Perpres) No. 72/2020 signed last week.

 The government has allocated Rp 695.2 trillion worth of COVID-19 related expenditure to fund health care and boost the economic recovery. Sri Mulyani said on Monday the pandemic would force the government to spend around Rp 903.46 trillion, comprising Rp 505 trillion for public-welfare programs and Rp 397 trillion in support for the private sector, from the state budget.

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