Purbaya: Panda Bond Helps Reduce Dollar Dependence

Finance Minister Purbaya Yudhi Sadewa stated that the issuance of Panda Bonds, valued at approximately 1 billion US dollars, is part of the government’s strategy to diversify funding sources while reducing dependence on the US dollar. “This is a diversification of our funding sources. Previously, global funding was only in dollars, we diversified to Japan, Australia, and China,” Purbaya said at the Presidential Palace complex in Jakarta on Thursday. He explained that using the yuan in transactions with China could also strengthen the Local Currency Transaction (LCT) scheme, thereby reducing reliance on the US dollar. “And I will use the LCT, Local Currency Transaction. So they pay in yuan, and I receive rupiah here, between central banks,” he stated. According to him, this strategy can also help maintain the rupiah exchange rate by reducing pressure from the need for US dollars. “The rupiah will tend to strengthen because of this dollar pressure. So this strategy was deliberately developed to maximise existing instruments to maintain the rupiah exchange rate,” Purbaya said. Purbaya mentioned that the initial phase of the Panda Bond issuance is capped at around 1 billion US dollars to introduce the instrument to the market. He said the government is currently observing the book building results of this issuance before considering a subsequent issuance with a larger value. Purbaya added that the funds raised from the Panda Bond issuance will be used to cover part of the financing needs for the deficit and government spending. He also noted that the Panda Bond issuance is part of efforts to broaden the government’s funding sources so as not to rely too heavily on the US dollar market.