Govt to buy back debts, issue more bonds: Boediono

The Jakarta Post, Jakarta

The government plans to repurchase part of its domestic debts in early September in a bid to reduce its interest payments, Minister of Finance Boediono said on Tuesday.

He added that the government would also issue more bonds to help plug the wider-than-projected deficit in this year's state budget.

Speaking on the sidelines of a hearing with the House of Representatives budgetary committee, Boediono said that Rp 72.7 trillion (US$8.5 billion) worth of bonds would mature between Jan. 1, 2004 and Dec. 31, 2006.

"We will open another bid for investors soon to value our bonds, but the amount of the bonds to be repurchased is yet to be decided, depending on their bids," he said.

The government spent in early August about Rp 3.25 trillion to repurchase part of the aforementioned bonds. The government had initially allocated Rp 13.5 trillion for the repurchase of the bonds, but due to the wider deficit, the budget was reduced to Rp 9.4 trillion.

The state budget has been heavily burdened by the payment of interest on bonds totaling about Rp 450 trillion that were issued in the late 1990s to bail out troubled banks.

To ease the interest burden, the government launched the debt buy-back strategy.

The government will repurchase the bonds through an auction. Boediono said that 19 local and foreign financial institutions had been appointed as participants in the auction process. They include Bank Central Asia, Bank Niaga, Bank Buana, Bank Danamon, Bank Mega, Bank Lippo, Bank Panin, Bank Mandiri, BNI, BRI, Citibank NA, HSBC, Deutsche Bank, Standard Chartered Bank, ABN Amro NV, Trimegah Securities, Mandiri Sekuritas, Danareksa Sekuritas and Bahana Securities.

Elsewhere, Boediono said the government had decided to increase the size of its T-bonds issuance this year to Rp 11.7 trillion from the initial plan of Rp 7.7 trillion to cover the wider deficit.

In April, some Rp 2.7 trillion worth of bonds had been issued.

The second issuance is expected to take place in early September, Boediono said.

Apart from bolstering government finances, the T-bond sales are intended to set a benchmark for corporate bond issuance and help boost activities in the domestic bond market.

Eyebox

State bonds to be repurchased

Series Matures Coupon (%)

VR0004 25/01/2004 9,17611 VR0005 25/05/2004 9,06483 FR0001 15/09/2004 12,00000 FR0006 15/09/2004 16,50000 FR0007 15/09/2004 10,00000 VR0006 25/12/2004 10,18433 VR0007 25/04/2005 9,17611 FR0003 15/05/2005 12,00000 FR0008 15/05/2005 16,50000 FR0009 15/05/2005 10,00000 VR0008 25/11/2005 9,06483 FR0004 15/02/2006 12,12500 VR0009 25/03/2006 10,18433 VR0010 25/10/2006 9,17611

Source: Ministry of Finance