Govt to redeem some $4.6b worth of bonds this year
Govt to redeem some $4.6b worth of bonds this year
Dadan Wijaksana, The Jakarta Post, Jakarta
The government aims to redeem some Rp 43.4 trillion (US$4.6
billion) worth of bonds this year in a bid to reduce the huge
amount of sovereign debt and minimize the risk of a fiscal
disaster.
Minister of Finance Boediono said on Wednesday that the bond
redemption plan would be conducted via various schemes including
asset-to-bond swaps and a buy-back program.
Part of the government's proceeds from the privatization
program and sale of assets under the Indonesian Bank
Restructuring Agency (IBRA) would be used to finance the buy-back
program, he said.
"These efforts are all aimed at bring debt costs to a more
controllable level to ensure fiscal sustainability in the long
run," Boediono said in a press release.
The statement added that by using the same methods, the
government managed last year to reduce the value of its
outstanding bonds by Rp 15.75 trillion, Rp 8.7 trillion of which
was contributed by the IBRA bond-to-asset swap program.
The government has had to come up with the bond redemption
policy so as to help reduce the costly burden of the nation's
sovereign debt on the state budget.
Currently, the government owes some Rp 660 trillion worth of
bonds to local banks and Bank Indonesia following one of the
world's costliest banking bailouts ever following the 1997
regional financial crisis.
Local banks received some Rp 430 trillion of recapitalization
bonds, on which the government must pay more than Rp 60 trillion
annually in interest alone.
The government owes the remainder to Bank Indonesia, which
channeled some Rp 144 trillion to help ailing banks in the wake
of the crisis.
Elsewhere, Boediono said that the government would go ahead
with its plan to issue some Rp 7.7 trillion worth of bonds this
year to repay maturing bonds.
This 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 will be paid using
the proceeds of IBRA asset sales.
It is the remainder that the government plans to refinance.
Last year, the government issued bonds with longer maturities
to replace some Rp 174.5 trillion worth of maturing bonds held by
four state-owned banks. This "reprofiling" strategy allowed the
government to put back the maturity date of the bonds from 2004
to 2010.
The four banks were Bank Mandiri, Bank Rakyat Indonesia (BRI),
Bank Tabungan Negara (BTN) and Bank Negara Indonesia (BNI).
Together they hold Rp 231.62 trillion worth of recap bonds.