Indonesia to turn to offshore bond market to plug deficit

Indonesia will turn to the offshore bond market as part of changes to treasury management following the winding up of the Consultative Group on Indonesia ( CGI), a forum made up of Indonesia's major creditors, a senior official says.

Saturday's Kompas, a leading local newspaper, quoted Indonesian Finance Ministry's director general for debt management Rahmat Waluyanto as saying that the government would issue more securities to cover the cost of foreign loan principle repayments, and to help finance the budget deficit, rather than taking to new foreign loans.

Finance Minister Sri Mulyani Indrawati had said that tapping the bond market would be much more favorable than taking out further foreign loan from the exchange rates, maturity and interest rate perspectives. Besides, it would help bolster the country's political independence.

The country's total sovereign bond debt currently stands at 82. 3 billion U.S. dollars or 57.3 percent of the Indonesia's total sovereign debt profile in 2000, when 53 percent of the debt consisted of bonds and 47 percent of foreign loans.

"In addition, our strategy in managing the nation's debt will include paying back commercial loans ahead of schedule. In particular we will try to reduce the amount of commercial loans," the minister quoted by the Jakarta Post as saying.

But Rahmat said a reduction in commercial loans might not be possible in the near future as most of these loans were still needed to finance export credits for the procurement of the military equipment.

Indonesia this week decided to terminate the way to borrow money to the international through the CGI, which pledged 5.4 billion U.S. dollars new loans and grants to Indonesia last year.

Source: Xinhua