Govt mulls global bond issue next year

Govt mulls global bond issue next year

Dadan Wijaksana, The Jakarta Post/Jakarta

After a successful global bond issue early this year, the
government may again tap the international market next year by
issuing new dollar-dominated bonds to help plug the 2005 budget
deficit.

Anggito Abimanyu, head of the fiscal policy division at the
Ministry of Finance, said the government was keeping a global
bond issue as an option because of its low cost as compared to a
domestic bond issue.

Market sentiment toward the country's economy and the cost of
borrowing were among the main factors behind the option, he said.

"It is cheaper to raise foreign finances," Anggito told
reporters on Thursday.

He did not cite the precise amount or timetable.

But, as stated in the newly unveiled 2005 draft budget, the
government is planning to issue a total of Rp 50 trillion (some
US$5.4 billion) worth of bonds next year as part of its deficit-
financing scheme.

If the global issue plan materializes, it would be the third
time the government carried out such a scheme. In 1996, it issued
its maiden sovereign bond issue worth $400 million, due in 2006.

The second issue was carried out in March, when the government
launched a $1 billion international bond issue, more than double
the initial plan of $400 million following overwhelming demand
from global investors.

The yield in the March issue was set at 6.85 percent, far
lower than a yield of around 11 percent set in domestic bond
issues at present.

The government is relying on the proceeds from those bond
issues to fill the budget deficit, which next year is set at Rp
16.9 trillion, or 0.8 percent of gross domestic product (GDP).

For this year, the government plans to sell bonds amounting to
Rp 32.5 trillion to help cover the deficit earmarked at Rp 24.4
trillion or 1.2 percent of GDP.

As for the market sentiment, some economists have said that
the country needed to gain the confidence of international
investors with concerns stemming from the general election
expected to diminish by next year.

A more robust economic growth projection in 2005 and continued
stability in macroeconomics indicators are also expected to
entice foreign investors.

The country's economy is forecast to grow 4.8 percent and 5.4
percent this year and next respectively -- from 4.1 percent
growth in 2003.