Government to sell second Samurai bonds in late April

The Indonesian government will launch in late April this year yen-denominated bonds worth about US$1.1 billion to help finance the state budget deficit, a senior Finance Ministry official has said.

Director General of Debt Management Rahmat Waluyanto said in Jakarta on Monday that proceeds from the second yen-denominated bonds would partly finance Indonesia’s 2010 budget deficit of Rp 98.01 trillion ($10.59 billion), equivalent to 1.6 percent of the country’s gross domestic product (GDP).

Speaking to reporters after a seminar on “Dissecting the 2010 State Budget” held by the Finance Ministry, Rahmat said that the bonds also called Samurai bonds would be the second set of yen-denominated bonds sold by the government.

The first Samurai bonds were issued in July last year, raising about ¥35 billion ($382.1 million). The 10-year bonds offers coupons with a yield of 2.73 percent a year.

As of Feb. 10 the government has issued Rp 44.68 trillion of bonds, or 25.54 percent of its Rp 175.06 trillion target for gross bond issuance in 2010.

The Japan Bank for International Cooperation is backing the sale of Indonesia’s Samurai bonds as part of standby loans worth $1.5 billion provided by Japan to help Indonesia to cope with the global financial crisis.

In addition, the government also plans to issue global Islamic bonds or sukuk, the amount of which has yet to be disclosed, before the fasting month in August, Rahmat said earlier. In April 2009 Indonesia’s first sale of international dollar-denominated sukuk was hugely oversubscribed with a total order of $4.7 billion, seven times more than the $650 million offered by the government.

Indonesia’s upgraded credit ratings by Moody’s Investors Service to Ba2 and by Fitch Ratings to BB+ will likely boost market confidence in Indonesia’s bonds. Standard & Poor’s also changed Indonesia’s outlook to positive.

The economy grew by 4.5 percent last year. The government estimates the economy will expand 5.5 percent this year. But the government might revise the 2010 budget deficit upward from 1.6 percent to 2.2 percent of GDP in order to allocate more funds for food and energy.