Govt plans Rp 7.74 trillion in new bonds next year
Govt plans Rp 7.74 trillion in new bonds next year
Dadan Wijaksana, The Jakarta Post, Jakarta
Starting in January, the government is expected to issue new
bonds to refinance Rp 7.47 trillion (around US$800 million) worth
of recap bonds and those owed to the central bank, which are due
to mature during the year.
Minister of Finance Boediono told a hearing with the House of
Representatives' Commission IX on financial affairs that
replacing maturing bonds with new ones, known as refinancing,
would ease the burden on next year's state budget.
"We'll do the refinancing with bonds that carry long-term
maturity periods and are worth between Rp 2 trillion to Rp 4
trillion, as well as short-term bonds or T-bills, amounting to
Rp 5 trillion," Boediono told the hearing on Monday.
T-bills, or Treasury bills, are government bonds that mature
within six to 12 months.
Next year, the government must pay Rp 14.84 trillion worth of
maturing debts it owes to Bank Indonesia and a number of local
banks.
Of that amount, some Rp 7.37 trillion would be paid using
proceeds from state asset sales by the Indonesian Bank
Restructuring Agency (IBRA). The remainder of which, the
government plans to refinance.
Issuing the new bonds however simply defers the maturity
dates, meaning the government must continue to pay interest on
them.
Monday's meeting with Commission IX was meant to obtain
legislator approval for the additional Rp 835 billion to Rp 970
billion in interest rates that the government must pay in order
to refinance next year's maturing bonds.
However, it has become apparent that the government now has
little choice other than to push back the payment on these bonds,
given its tight state budget.
The government owes some $60 billion to local banks and Bank
Indonesia following one of the world's costliest banking bailouts
ever, during the 1997 economic crisis.
Banks received some Rp 430 trillion worth of recapitalization
bonds, on which the government must pay some Rp 59 trillion in
interest and Rp 3.9 trillion on maturing debts this year.
Bank Indonesia obtained another Rp 144 trillion in bonds to
replace an equal amount of money the central bank had spent on
local banks that were hit by massive runs during the crisis.
A large chunk of state bonds will start maturing in 2004 with
the highest payment worth some Rp 81 trillion due by 2009.
Refinancing the bonds will help the government spread the
massive debt payments to more affordable levels.
In another example of managing its huge public debts, the
government has also requested that legislators delay the payments
of Rp 174.59 trillion worth of recapitalization bonds to four
state banks.
Under a scheme it called reprofiling, the government hopes to
delay until 2020 the payment of recapitalization bonds payable
between 2004 to 2010.
In return, the four state banks would receive higher interest
payments worth around Rp 823 billion every year.
The four banks that have agreed to the scheme are Bank
Mandiri, Bank Rakyat Indonesia (BRI), Bank Tabungan Negara (BTN)
and Bank Negara Indonesia (BNI).
Together they hold Rp 231.62 trillion worth of
recapitalization bonds.
Legislators however have voiced objections to the reprofiling
plan, citing the increase in interest payments.
Boediono explained that the issuance of T-bills and
reprofiling bonds were part of attempts to manage Indonesia's
huge public debts.
With T-bills, the government also hopes to entice bond trading
in the secondary market as their shorter maturity period made T-
bills more attractive to investors.