Govt to auction short-term bonds in December
Govt to auction short-term bonds in December
JAKARTA (JP): The government will issue short-term bonds in
December in a bid to further support the bank recapitalization
program, according to director general of financial institutions
at the Ministry of Finance Darmin Nasution.
Darmin said on Tuesday that proceeds from the 6 to 12-month
bonds, which would be auctioned in the primary market, would be
used to repurchase some of the government's longer-term bank
recapitalization bonds.
Speaking to reporters following a meeting with Coordinating
Minister for Economic Affairs Rizal Ramli, Darmin said that the
issuance of the short-term securities was also part of an effort
to develop the domestic bond market.
"The objective is to push the secondary (bond) market ...
We'll start by auctioning short-term bonds," he said.
The government has so far issued more than Rp 400 trillion
(US$45.97 billion) worth of bonds to help finance the country's
bank recapitalization program.
The government had initially expected the recapitalized banks
to be able to sell the bonds in the secondary market and that the
bonds would be attractive to investors due to their longer
maturity period.
The government bank recapitalization bonds mature in more than
five years.
Darmin said that the auctioning of the short-term bonds would
be implemented together with the auction of Bank Indonesia's
three-month SBI promissory notes.
He was also optimistic that the recapitalized banks would
participate in the auction.
"We will discuss the new plan with the recapitalized banks
soon," he said.
Darmin declined to provide further details, arguing that the
new measure was still being prepared by the debt management unit
of the finance ministry and Bank Indonesia.
He said that the strategy would be published in October.
According to the latest government letter of intent (LoI) to
the International Monetary Fund, the issuance of the short-term
bonds is subject to the approval of the House of Representatives.
The LoI also said that the new measure was part of the overall
government public debt management strategy.
According to the LoI, which basically outlines a set of
government economic reform programs to be implemented within a
certain period of time, the government is giving high priority to
establishing sound debt management practices and developing the
domestic bond market.
The units currently involved in debt management will work
closely to consolidate existing debt management activities by the
end of December.
By the same date, the government will submit to the House a
draft act providing legal underpinnings for debt management,
including a standing authority for debt service and authority for
borrowing within the budget cycle.(rei)