Government set to issue more state bonds

Urip Hudiono, The Jakarta Post/Jakarta

The government is likely to issue more state bonds -- a total of Rp 50.1 trillion (US$5.41 billion) -- to help finance a likely spending increase in the 2005 state budget, a finance ministry official says.

The Ministry of Finance's director general for state treasury Mulia Nasution said on Friday that issuing more bonds -- for both domestic and international markets -- would anticipate additional state spending that could be covered by existing revenue.

Although the government was still calculating where expenditure in the country would increase, Mulia stressed the need to rebuild the tsunami-stricken province of Aceh.

"As we know, (reconstruction of) Aceh alone needs some Rp 40 trillion for the next five years, while other areas of expenditure could increase as well," he said. "If that happens, we have to explore additional sources of revenue."

Mulia, however, declined to elaborate further about the government's plan to supersize its bond issues as this option was still in its early consideration. "We are still studying it."

He said the government expected the state budget to be within tolerable limits if it had to be revised.

The 2005 state budget, which was drafted by the previous administration, put government expenditure at Rp 264 trillion.

The government has been planning to revise several of the budget's assumptions, including the deficit target -- from 0.8 percent to 1 percent -- and the oil price -- from $24 to $35 a barrel amid soaring international prices.

The government had originally planned to issue a total of Rp 43 trillion bonds throughout 2005, including sovereign dollar- denominated bonds that would be used to redeem maturing debts and help finance the state budget deficit.

The government managed to sell Rp 3 trillion worth of 12-year rupiah bonds earlier this week, while in its first bond issue last month, it sold Rp 5 trillion worth of 10-year bonds.

Next month, the government plans to issue $1.5 billion of dollar-denominated global bonds.

Last year, it sold Rp 32.5 trillion in bonds, including $1 billion of global bonds.

If the government issues Rp 50.1 trillion in bonds this year it will equal the figure in the original 2005 draft budget. However, the House of Representatives has only approved Rp 43 trillion worth of bonds.