Panda Bond Issuance Could Reduce Indonesia's Reliance on the US Dollar

The issuance of China renminbi-denominated bonds, known as Panda Bonds, could enable Indonesia to reduce its reliance on the US dollar, according to an economist. Myrdal Gunarto, an economist at PT Bank Tabungan Negara (Persero) Tbk (BTN), observed that Indonesia is gradually moving away from dollar dependency. The country has already initiated transactions using the yuan in trade through the local currency transaction (LCT) scheme, and now the government’s fiscal position is being strengthened by issuing debt securities in the currency of the Panda nation. “Yes, because gradually LCT transactions with the Chinese currency are also continuing to increase,” Myrdal told CNBC Indonesia on Wednesday (22/7/2026). Although Indonesia is beginning to shed its reliance on the US dollar, Myrdal stated that it will still take time to fully displace the greenback’s role as a transaction tool with the international community. “Indeed, it will take a considerable amount of time for other currencies to replace the hegemony of the US dollar in international transaction activities,” Myrdal said. He also described the Panda Bond as a government success in implementing a fiscal financing diversification strategy, with the added bonus of investor funds flowing into the country. “The Panda Bond can bring in foreign inflows at a low cost. I see the indicative yield of the Panda Bond is very low. This is certainly a success for the government in carrying out its fiscal financing diversification strategy.” The government is set to issue the yuan-denominated bonds on 23 July 2026, targeting to raise funds equivalent to US$1 billion. The Panda Bond has been assessed by Lianhe Credit Rating, one of the strongest rating agencies in China, which assigned the debt a rating of AAA/Stable. Myrdal stated that the AAA/Stable rating from Lianhe Credit Rating is a massive achievement and will have several macroeconomic and fiscal implications. “First, a reduction in the Cost of Fund. With a risk profile assessed as very minimal, the government has a strong bargaining position to push the yield as low as possible. This is crucial to keeping the state budget’s debt interest burden efficient,” Myrdal said. The second implication is the diversification of the investor base and currency. The government’s move to target the equivalent of US$1 billion (around 7 trillion yuan) in the 23 July 2026 emission is a tactical diversification manoeuvre. “Entering the renminbi market opens access to China’s massive capital pool, so we are not solely dependent on US dollar-denominated issuances (Global Bond) or Yen (Samurai Bond) amidst global interest rate volatility,” he said. Finally, Myrdal sees the AAA rating as confirmation that Indonesia’s economic fundamentals, foreign exchange reserve adequacy, and fiscal stability are recognised as solid by global investors.