`House to hear global bond plan in August'

`House to hear global bond plan in August'

The Jakarta Post, Jakarta

The government is to unveil its planned sovereign bonds issue in
August, when President Megawati Soekarnoputri presents the 2004
state budget draft to the House of Representatives, Minister of
Finance Boediono said on Friday.

"It (the bonds issue) is part of the draft budget. In August,
we'll submit it to the House of Representatives, and then we'll
wait for an agreement (from the lawmakers)," Boediono told
reporters.

Based on preliminary figures, the bonds issue is likely to be
worth around US$400 million, but the final figure should await
approval from the House, he said.

The government is planning to issue bonds on the international
market next year as an alternative source of funding to help
finance the 2004 state budget deficit, projected at around 1
percent of the country's gross domestic product (GDP).

Some analysts have predicted the bond issue, a first since the
1997-1998 financial crisis, would be attractive in the eyes of
international investors, given the country's newfound
macroeconomic stability.

A stronger rupiah, benign inflation and declining trend in the
central bank's benchmark interest rate have managed to improve
the country's sovereign ratings.

In 1996, Indonesia issued $400 million worth of Yankee bonds.

The government is making strenuous efforts to seek as many
sources of funds as possible to fill the deficit, particularly in
light of the government's ending the current International
Monetary Fund (IMF) program in December. Exiting the IMF program
will make the country ineligible for the debt rescheduling
facility from the Paris Club of creditor nations and the London
Club of private creditors, and the government will have to fully
repay maturing sovereign debts.

Additional pressure will come from a maturing government
domestic debt, estimated at Rp 24.7 trillion for next year alone.

Boediono said the government would need to make thorough
preparations for the bond issue to avoid unexpected outcomes.

"We're very careful about reentering the international market.
We must be successful. We need to be well-prepared for this, then
enter the market," he said, without elaborating the kinds of
preparation the government was currently undertaking.

Coordinating Minister for the Economy Dorodjatun Kuntjoro-
Jakti said earlier that the government must work hard to improve
the country's rating to minimize the cost in issuing sovereign
bonds.

He said the government would be forced to pay a high interest
rate for the bonds if its current rating of below-investment
grade was not improved.

Standard & Poor's has given Indonesia a B-minus sovereign
rating, while its investment grade rating is two notches higher
at triple-B.