Govt plans Rp 7.74 trillion in new bonds next year<\/p>\n
Dadan Wijaksana, The Jakarta Post, Jakarta<\/p>\n
Starting in January, the government is expected to issue new
\nbonds to refinance Rp 7.47 trillion (around US$800 million) worth
\nof recap bonds and those owed to the central bank, which are due
\nto mature during the year.<\/p>\n
Minister of Finance Boediono told a hearing with the House of
\nRepresentatives' Commission IX on financial affairs that
\nreplacing maturing bonds with new ones, known as refinancing,
\nwould ease the burden on next year's state budget.<\/p>\n
\"We'll do the refinancing with bonds that carry long-term
\nmaturity periods and are worth between Rp 2 trillion to Rp 4
\ntrillion, as well as short-term bonds or T-bills, amounting to
\nRp 5 trillion,\" Boediono told the hearing on Monday.<\/p>\n
T-bills, or Treasury bills, are government bonds that mature
\nwithin six to 12 months.<\/p>\n
Next year, the government must pay Rp 14.84 trillion worth of
\nmaturing debts it owes to Bank Indonesia and a number of local
\nbanks.<\/p>\n
Of that amount, some Rp 7.37 trillion would be paid using
\nproceeds from state asset sales by the Indonesian Bank
\nRestructuring Agency (IBRA). The remainder of which, the
\ngovernment plans to refinance.<\/p>\n
Issuing the new bonds however simply defers the maturity
\ndates, meaning the government must continue to pay interest on
\nthem.<\/p>\n
Monday's meeting with Commission IX was meant to obtain
\nlegislator approval for the additional Rp 835 billion to Rp 970
\nbillion in interest rates that the government must pay in order
\nto refinance next year's maturing bonds.<\/p>\n
However, it has become apparent that the government now has
\nlittle choice other than to push back the payment on these bonds,
\ngiven its tight state budget.<\/p>\n
The government owes some $60 billion to local banks and Bank
\nIndonesia following one of the world's costliest banking bailouts
\never, during the 1997 economic crisis.<\/p>\n
Banks received some Rp 430 trillion worth of recapitalization
\nbonds, on which the government must pay some Rp 59 trillion in
\ninterest and Rp 3.9 trillion on maturing debts this year.<\/p>\n
Bank Indonesia obtained another Rp 144 trillion in bonds to
\nreplace an equal amount of money the central bank had spent on
\nlocal banks that were hit by massive runs during the crisis.<\/p>\n
A large chunk of state bonds will start maturing in 2004 with
\nthe highest payment worth some Rp 81 trillion due by 2009.<\/p>\n
Refinancing the bonds will help the government spread the
\nmassive debt payments to more affordable levels.<\/p>\n
In another example of managing its huge public debts, the
\ngovernment has also requested that legislators delay the payments
\nof Rp 174.59 trillion worth of recapitalization bonds to four
\nstate banks.<\/p>\n
Under a scheme it called reprofiling, the government hopes to
\ndelay until 2020 the payment of recapitalization bonds payable
\nbetween 2004 to 2010.<\/p>\n
In return, the four state banks would receive higher interest
\npayments worth around Rp 823 billion every year.<\/p>\n
The four banks that have agreed to the scheme are Bank
\nMandiri, Bank Rakyat Indonesia (BRI), Bank Tabungan Negara (BTN)
\nand Bank Negara Indonesia (BNI).<\/p>\n
Together they hold Rp 231.62 trillion worth of
\nrecapitalization bonds.<\/p>\n
Legislators however have voiced objections to the reprofiling
\nplan, citing the increase in interest payments.<\/p>\n
Boediono explained that the issuance of T-bills and
\nreprofiling bonds were part of attempts to manage Indonesia's
\nhuge public debts.<\/p>\n
With T-bills, the government also hopes to entice bond trading
\nin the secondary market as their shorter maturity period made T-
\nbills more attractive to investors.<\/p>",
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"sponsor": "Okusi Associates",
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