Govt may issue $1.5b global bond in March
Govt may issue $1.5b global bond in March
The Jakarta Post, Jakarta
The government is likely to issue up to US$1.5 billion in
overseas bonds during the first quarter in an effort to finance
the 2005 state budget, a senior finance official has said.
Mulia Nasution, the finance ministry's Director General for
Treasury, told reporters on Monday that the issue, which would be
the nation's third global bond issue, would be worth $1 billion
to $1.5 billion.
"We're still studying the precise figure, but as an image-
building market effort, it would be worth at least $1 billion,
and could be raised to as much as $1.5 billion.
"I do not think it will reach $2 billion, as this would be too
high and is suitable only for developed countries, not developing
ones like Indonesia," Mulia said.
As for the timing, he said sooner would be better for the
government, as it could mean "less competitors in the market".
"It's in the first quarter sometime, probably in March," he
added.
The government has been relying on proceeds from bond issues
-- both domestic and dollar-denominated bonds -- to finance its
deficit.
However, as sentiment toward the country's economy slowly
improves and reduces the risk of investing here, the costs of
issuing global bonds have also fallen in proportion to the costs
of issuing domestic bonds.
A more robust economic growth projection for 2005 and
continuing macroeconomic stability would entice more foreign
investors to the bond issue.
The economy is expected to grow 4.8 percent this year and 5.4
percent next year, from a mere 4.1 percent growth in 2003.
The government is to sell Rp 32.5 trillion in domestic and
global bonds this year to help finance a deficit of Rp 26.3
trillion, which accounts for 1.3 percent of the gross domestic
product (GDP).
In comparison, it plans to issue Rp 43 trillion in domestic
and international bonds next year to help plug the budget
deficit, estimated at Rp 17.4 trillion, or about 0.8 percent of
the GDP.
Next year's global bonds will be the third to be issued.
In 1996, the government issued $400 million in maiden
sovereign bonds, which are due to mature in 2006. The second bond
issues was in March 2004, when the government issued $1 billion
in 10-year international bonds, more than double the initially
planned $400 million issue, following overwhelming demand from
global investors.
The yield in the March issue was set at 6.85 percent, far
lower than the current 11 percent yield set for domestic bond
issues.
Elsewhere, Mulia said a small team at the ministry was still
discussing everything regarding the planned issue, including
actions needed to prepare the move.
As in previous bond issues, he said, the government would
embark on a non-deal road show to several nations worldwide,
mostly to the world's major financial centers such as U.S.
cities, Hong Kong and London.
"I think we could start the road show in December," he said,
adding that the tour was also especially important as a means to
introduce the new government and its vision on Indonesia's future
economy to the international community so that potential
investors could learn about the commitments of the new cabinet
towards reform.