Indonesia has issued new rules allowing its regional governments to issue bonds but the debt has to be denominated in rupiah and sold in the domestic markets, Reuters reported on Monday (5/2/07).
"Regional government bonds are regional debt that are offered to the public through a public offering in the capital market. They are only allowed to be issued in the domestic capital markets and must be rupiah-denominated," a Finance Department statement said.
Some regional governments have said in the past they wanted to issue bonds to fund badly-needed infrastructure projects.
Rupiah bonds have attracted strong demand in recent months on expectations of domestic interest rate cuts and the government expects to step up its efforts to strengthen its bond market this year.
It expects to pass a law this year which would allow it to issue its first sovereign Islamic bonds. It also expects to issue its first treasury bills this year and plans to issue more bonds for retail investors, after the first such issue last year.
Separately, State Minister for National Development Planning Paskah Suzetta said the government sees the bond market playing a bigger role in helping finance the budget deficit after the end of the Consultative Group on Indonesia.
The budget deficit is forecast at 1.1% of the gross domestic product this year. We will issue rupiah (debt) optimally," Suzetta told reporters.
The central government is aiming to raise Rp40.61 trillion ($4.48 billion) in net bond issues this year after Rp35.9 trillion last year. Net bond issues are gross issues minus certain factors such as maturing debt and bond buybacks.