Govt prepares bond sale to plug budget deficit
Govt prepares bond sale to plug budget deficit
Bloomberg, Jakarta
Indonesia invited banks to make proposals for a sale of bonds, as
record oil prices force the government to borrow abroad for the
second time this year to help plug a budget deficit, a finance
ministry official said.
"We sent invitations to all international investment banks to
advise on a sale," Rahmat Waluyanto, a director of the ministry's
debt management unit said in an interview on Thursday.
"The timeframe has not yet been scheduled. It will depend on
our budget needs." He declined to say how many banks were invited
or how much the sale may raise.
The government of Southeast Asia's largest economy is seeking
to reduce an estimated Rp 40 trillion (US$3.87 billion) budget
shortfall this year, amid a slide in its currency to the lowest
in three and a half years and waning investor confidence. Dollar
demand and the cost of oil imports are rising in Indonesia, which
is the only OPEC member that's a net importer of the fuel.
"The worry is the shortage of dollars," said Desmond Soon, who
manages about $200 million of debt at Pacific Asset Management in
Singapore. "The market is watching their reserves position."
The rupiah fell 0.7 percent to 10,341 against the dollar as of
1:15 p.m. in Jakarta, according to data compiled by Bloomberg,
bringing declines for the year to 10.4 percent, the most among
major Asia Pacific nations. Oil prices are forcing the government
to buy dollars and dip into its foreign exchange reserves.
Indonesia's Coordinating Minister for the Economy, Aburizal
Bakrie, said on Wednesday a weakening of the rupiah would not
lead to a slump in the country's foreign reserves, which "are
still safe."
The government's foreign exchange reserves stood at $32.52
billion as of Aug. 15, according to central bank data.
Oil Trouble
Subsidies paid to local oil companies for gasoline, diesel and
kerosene may widen the budget deficit to 1 percent of gross
domestic product from a targeted 0.8 percent, President Susilo
Bambang Yudhoyono said on Aug. 16.
Record crude oil prices, a fall in the rupiah and concern
about another bond sale have led to a weakening of Indonesia's
dollar-denominated bonds, increasing the government's borrowing
costs.
Indonesia sold $1 billion of dollar-denominated bonds in
April, its third since 1996. Citigroup Inc., Deutsche Bank AG and
UBS AG managed the sale.
The yield on the benchmark 7.25 percent bonds maturing in
April 2015 was 7.66 percent as of 11:27 a.m. in Jakarta,
according to data provided by Deutsche Bank. The yield has
widened from 7.15 percent on Aug. 12. Indonesia priced the bonds
on April 13 to yield 7.375 percent.
Pacific Asset's Soon, who bought sovereign bonds in April,
said he will only buy the government's new securities if they are
offered at an attractive premium to the existing debt.
"Let's see what sort of spreads it comes out at," Soon said.