Indonesia launches US$1b global int'l bond

Indonesia launches US$1b global int'l bond

Fitri Wulandari and Dadan Wijaksana, The Jakarta Post, Jakarta

The government launched a US$1 billion international bond, more
than double the initial plan of $400 million, following
overwhelming demand from global investors.

The 10-year bond was launched with a yield of 6.85 percent,Dow
Jones reported from New York late on Wednesday Jakarta time where
a government team had been conducting a final roadshow for the
offering. The yield was lower than the 7 percent target set
earlier by the government.

Government officials could not be reached for confirmation,
although the increase in the size of the offer had been expected
as Minister of Finance Boediono had hinted earlier in the day.

"There is a possibility it will be more than $400 million, as
we see room for it," Boediono told reporters before the
announcement late on Wednesday, Jakarta time.

Demand for the bonds has topped $4 billion, more than 10 times
larger than the $400 million initially planned.

The upcoming issue, jointly managed by JP Morgan and Deutsche
Bank, will be the first since the 1997-1998 financial crisis
after the government issued its maiden sovereign bond issue in
1996 worth $400 million, due to mature in 2006.

In the 2004 state budget, the government plans to issue a
total of Rp 32.5 trillion in bonds throughout the year -- both
international and domestic -- to help plug the deficit.

The issue is seen as timely because Indonesia's profile among
investors has been improved thanks to improved macroeconomic
performance, as evidenced by a relatively stable rupiah, benign
inflation, declining central bank interest rate and continued
fiscal consolidation.

The country's economy is forecast to grow 4.8 percent this
year, from 4.1 percent in 2003. The economy contracted by 13.1
percent in 1998. Annualized inflation last month fell to a four-
year low of 4.6 percent, compared to a high of 77.6 percent in
1998 following the financial crisis.

State budget deficit is forecast to narrow to 1.2 percent of
gross domestic product this year, down from 1.9 percent last
year.

All of which helps boost the country's markets among various
international ratings services and subsequently helps suppress
the yield. The rupiah's long-term rating is a B according to
Standard & Poor's, a B2 by Moody's Investors Service and B+ from
Fitch.

The government is pushing to seek sources of funds to fill the
deficit gap this year, as the government has ended its special
lending program with the International Monetary Fund (IMF).

Exiting the program means the country is ineligible for
further debt rescheduling from the Paris Club of creditor nations
and the London Club of private creditors, so the government has
to fully repay maturing sovereign debts, which will put heavy
pressure on the budget.

Additional pressure will also come from maturing government
domestic debts, which for this year were estimated at Rp 24.7
trillion.

Earlier, Bank Indonesia governor Burhanuddin Abdullah said
demands from investors had skyrocketed to $4.2 billion, in what
he claimed as a vote of confidence from the international
community on Indonesia's economy.

"Demands received from Asia, Europe and the U.S. have reached
$4.1 billion. This is a warm welcome to our economy," he said.

The demands were booked during a week-long roadshow ending on
Wednesday by a government team to a number of the world's major
financial centers, including Hong Kong, Luxembourg, Frankfurt,
Boston and Los Angeles.