No more bond issues, House tells govt<\/p>\n
Urip Hudiono, The Jakarta Post, Jakarta<\/p>\n
Citing questionable debt management, the House of Representatives
\nhas asked the government to hold off on further bond issues or
\nbuyback plans until it has discussed a comprehensive debt
\nstrategy for the country, in a series of meetings expected to
\nstart next week.<\/p>\n
The request may hamper the government in its race to finance
\nthis year's budget shortfall through bond offerings -- including
\nanother global bond sale by the end of the year -- as well as its
\nreprofiling of the securities' payment burden through
\nrepurchasing and extensions, at a time when the market is in a
\nfavorable situation.<\/p>\n
Deputy chairman of House Commission XI for financial affairs
\nMax Moein said in a hearing on Monday with the finance ministry's
\ndirector general of the treasury, Mulia P. Nasution, that the
\ncommission had decided to postpone all bond-related transactions.<\/p>\n
\"The government must first explain the current condition of
\nour debt stock, and what it plans to do about it, so as not to
\ndisturb the budget's fiscal sustainability and the nation's
\nwelfare development priorities,\" he said.<\/p>\n
The commission is expected to hold a hearing on the matter
\nwith Minister of Finance Jusuf Anwar, State Minister for National
\nDevelopment Planning Sri Mulyani Indrawati and Bank Indonesia
\nGovernor Burhanuddin Abdullah on Sept. 20.<\/p>\n
Data from the finance ministry's Directorate General of the
\nTreasury shows that the government had as of Sept. 1 issued a
\ntotal of Rp 30.5 trillion (US$3 billion) worth of bonds this
\nyear.<\/p>\n
Included in the offerings was a $1 billion global bond sale in
\nApril, the country's third dollar-denominated bond issue after
\nlast year's $1 billion and 1994's $400 million issues.<\/p>\n
The government -- with the House's previous approval -- is
\ntargeting Rp 43.3 trillion in bond issues this year to help plug
\nthe budget deficit. Of this amount, Rp 21.2 trillion will be used
\nto pay off and buy back a critically burdening bulk of securities
\nmaturing between 2007 and 2009.<\/p>\n
With the current balance, the government hopes to raise
\nanother Rp 12.7 trillion, with the possibility of offering its
\nmore lucrative global bonds, considering investors' lately
\ndecreasing interest in its local bonds.<\/p>\n
Commenting on the commission's request, Mulia lamented the
\ndecision but said the ministry would have to comply with it.<\/p>\n
\"Holding off our next bond issue is still reasonable, but that
\nis not the case for the buyback,\" he said. \"The market's current
\nbearish mood would be the right time for the government to do a
\nbuyback.\"<\/p>\n
A buyback system allows the government to redeem bonds which
\nhave yet to mature, so as to ease debt payments in the future.<\/p>\n
A senior official at the directorate general, Rahmat
\nWaluyanto, said the rupiah's recent slump and rising interest
\nrates could pose additional payment burdens.<\/p>\n
\"Every Rp 100 weakening of the rupiah will cost Rp 675 billion
\nmore in interest payments,\" he said. Every 1 percent increase in
\nBank Indonesia's three-month SBI note rate will cost an
\nadditional Rp 2.2 trillion.<\/p>\n
The rupiah has depreciated by some 10 percent this year, while
\nthe rate for the notes has increased to 9.25 percent from 7.3
\npercent at the beginning of the year.<\/p>",
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"sponsor": "Okusi Associates",
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