Purbaya: Panda Bond Helps Reduce Dollar Dependence

Jakarta (ANTARA) – Finance Minister Purbaya Yudhi Sadewa said the issuance of a Panda Bond worth around US$1 billion forms part of the government’s strategy to diversify funding sources whilst reducing dependence on the US dollar.

“This is a diversification of our funding sources. Previously, if globally it was only the dollar, we diversified to Japan and to Australia, and to China,” Purbaya said at the Presidential Palace complex in Jakarta on Thursday.

He said the use of the yuan in transactions with China could also strengthen the Local Currency Transaction (LCT) scheme, thereby reducing dependence on the US dollar.

“And I will use LCT, Local Currency Transaction. So they pay in yuan, I receive rupiah here, between banks and between central banks,” he said.

According to him, the strategy could also help maintain the value of the rupiah by reducing pressure stemming from the need for US dollars.

“The rupiah will tend to strengthen because of this pressure from the dollar. So this strategy was deliberately developed to maximise existing instruments to maintain the rupiah exchange rate,” Purbaya said.

Purbaya said the initial issuance of the Panda Bond is limited to around US$1 billion in order to introduce the instrument to the market. He said the government is still awaiting the results of the book building for the issuance before considering a subsequent, larger offering.

Purbaya added that funds raised from the Panda Bond issuance will be used to cover part of the deficit financing needs and government spending. He also said the Panda Bond issuance is part of efforts to broaden the government’s financing sources so as not to rely too heavily on the US dollar market.