Govt buys back Rp 1.96t in domestic bonds
Govt buys back Rp 1.96t in domestic bonds
Urip Hudiono, The Jakarta Post, Jakarta
The government bought back some Rp 1.96 trillion (US$230
million)-worth of bonds from institutional investors in an
auction on Thursday.
The bonds will mature between 2004 and 2010.
Minister of Finance Boediono said that the buyback was part of
a strategy to reduce the state budget deficit.
The government issued a total Rp 600 trillion-worth of bonds
to bail out the country's crumbling banking sector following the
1997 economic crisis.
The state budget has been heavily burdened in covering the
interest on the bonds.
Boediono said that the government planned to buy back more
bonds this year, but declined to disclose the timetable or the
amount.
In addition to the buyback strategy, the government is also
planning a debt-switch scheme, in which investors are offered an
option to swap maturing bonds they currently own with newly
issued ones.
"We are still considering the scheme and the amount, which can
hopefully be finalized this year," said Boediono.
The government is also planning to issue a total Rp 24
trillion-worth of bonds this year, to carry a lower interest rate
than those issued in the wake of the crisis.
Analysts have said that a reduction in the government public
debt should help improve the country's sovereign rating.
During Thursday's auction, 15 banks and four securities firms
offered some Rp 7.14 trillion-worth of bonds for sale to the
government.
"The government chose to only buy bonds that were considered
to be the most profitable in terms of their price and yield,"
Director General of Financial Institutions Darmin Nasution said.
"After taking account of the bonds' accrued interest, the
amount to be paid by the government will therefore be Rp 1.89
trillion," he said.
A total Rp 1 trillion in funds for the buyback would be taken
from this year's state budget, said Darmin, while the remainder
would be taken from government funds recovered from regional
development banks (BPD).
Settlement of the buyback, he continued, would be carried out
on Mar. 30 using Bank Indonesia's new settlement system (BI-
SSSS). The auction ran from 10 a.m. to 1 p.m., with BI using the
Ministry of Finance's Dealing System (MOFiDS).