No more bond issues, House tells govt
No more bond issues, House tells govt
Urip Hudiono, The Jakarta Post, Jakarta
Citing questionable debt management, the House of Representatives
has asked the government to hold off on further bond issues or
buyback plans until it has discussed a comprehensive debt
strategy for the country, in a series of meetings expected to
start next week.
The request may hamper the government in its race to finance
this year's budget shortfall through bond offerings -- including
another global bond sale by the end of the year -- as well as its
reprofiling of the securities' payment burden through
repurchasing and extensions, at a time when the market is in a
favorable situation.
Deputy chairman of House Commission XI for financial affairs
Max Moein said in a hearing on Monday with the finance ministry's
director general of the treasury, Mulia P. Nasution, that the
commission had decided to postpone all bond-related transactions.
"The government must first explain the current condition of
our debt stock, and what it plans to do about it, so as not to
disturb the budget's fiscal sustainability and the nation's
welfare development priorities," he said.
The commission is expected to hold a hearing on the matter
with Minister of Finance Jusuf Anwar, State Minister for National
Development Planning Sri Mulyani Indrawati and Bank Indonesia
Governor Burhanuddin Abdullah on Sept. 20.
Data from the finance ministry's Directorate General of the
Treasury shows that the government had as of Sept. 1 issued a
total of Rp 30.5 trillion (US$3 billion) worth of bonds this
year.
Included in the offerings was a $1 billion global bond sale in
April, the country's third dollar-denominated bond issue after
last year's $1 billion and 1994's $400 million issues.
The government -- with the House's previous approval -- is
targeting Rp 43.3 trillion in bond issues this year to help plug
the budget deficit. Of this amount, Rp 21.2 trillion will be used
to pay off and buy back a critically burdening bulk of securities
maturing between 2007 and 2009.
With the current balance, the government hopes to raise
another Rp 12.7 trillion, with the possibility of offering its
more lucrative global bonds, considering investors' lately
decreasing interest in its local bonds.
Commenting on the commission's request, Mulia lamented the
decision but said the ministry would have to comply with it.
"Holding off our next bond issue is still reasonable, but that
is not the case for the buyback," he said. "The market's current
bearish mood would be the right time for the government to do a
buyback."
A buyback system allows the government to redeem bonds which
have yet to mature, so as to ease debt payments in the future.
A senior official at the directorate general, Rahmat
Waluyanto, said the rupiah's recent slump and rising interest
rates could pose additional payment burdens.
"Every Rp 100 weakening of the rupiah will cost Rp 675 billion
more in interest payments," he said. Every 1 percent increase in
Bank Indonesia's three-month SBI note rate will cost an
additional Rp 2.2 trillion.
The rupiah has depreciated by some 10 percent this year, while
the rate for the notes has increased to 9.25 percent from 7.3
percent at the beginning of the year.