Government set to issue more state bonds

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.