Indonesia sells $3 billion bonds to plug deficit

February 28, 2009 by Prakash Dhawan · 1 Comment
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Indonesia has just sold 3 billion U.S. dollars of bonds in medium-term notes, which is the country’s largest ever dollar-denominated bond sale, to help plug the growing state budget deficit, the Jakarta Post daily reported on Saturday. The Indonesian Finance Minister Sri Mulyani said on Friday that the country had sold 2 billion dollars of ten-year bonds, with a yield of 11.75 percent; and 1 billion dollars of five-year bonds, with a yield of 10.5 percent.

The yields of ten-year notes and five-year notes are 8.759 percentage points and 8.474 points respectively, higher than similar-maturity U.S. Treasuries. According to the Ministry’s head of fiscal policy Anggito Abimanyu, the bonds will help cover the budget deficit of 139.5 trillion rupiah (about 11.625 billion dollars), equal to 2.5 percent of Indonesia’s gross domestic product (GDP), and increase forex reserves.

“Our trade surplus has declined; while there has been a capital outflow from our investment portfolio. The source from where we can maintain our forex reserves is foreign debts,” Anggito said, adding that the yields were within the government’s “benchmark”.

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