Government to offer Rp2.5t of bonds

The Jakarta Post, Jakarta

Limited in its options to plug a rising budget deficit beyond tapping the local debt market, the government plans to offer up to Rp 2.5 trillion (US$263 million) worth of securities to public investors next week, a finance ministry official said.

The Ministry of Finance's director general of state treasury Mulia Nasution said on Tuesday that the June 14 bond sale would be a two-tranche auction, in which the government will put up both its 11-year and 15-year treasury bonds up for bidding.

"The total indicative target for the bonds is Rp 2.5 trillion," Mulia said.

Last month, the government sold Rp 4.65 trillion of two-year bonds -- priced to yield 9.71 percent -- and 11-year bonds priced to yield 11.29 percent.

The government may have to increase its bonds sales target for this year by Rp 4.1 trillion -- from Rp 43.1 trillion to Rp 47.2 trillion -- on additional spending for fuel subsidies and for financing the rehabilitation and reconstruction of tsunami- stricken Aceh province.

Under the 2005 state budget, whose revision the government and the House of Representatives is expected to agree on this week, the deficit will likely reach Rp 20.3 trillion -- or 0.8 percent of the country's gross domestic product (GDP) -- from a previous Rp 19.5 trillion.

Last year, Indonesia sold Rp 32.5 trillion in bonds, including $1 billion of global bonds in March. The government has already offered global bonds this year of the same value in April.

Asked whether the target increase would mean the government would have to offer more global bonds this year, Mulia said that it was unlikely to do so.

"We will still have to discuss such a plan with the House," he said, adding that the government will likely rely more on local bond sales.

Although the government's bonds are still classified as junk, their improving credit rating has helped sales.

Global rating agency Moody's puts Indonesia's long-term local currency debt rating at B2 -- five levels below investment grade -- while Standard & Poor's rates the rupiah debt BB -- two levels below investment grade.