`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.