Indonesia halves 2023 bond sale plan on strong revenues

INDONESIA will halve its total bond issuance this year as authorities expect revenues to exceed targets – a decision also taken in anticipation of higher global interest rates, its finance minister told a parliamentary hearing on Monday (Jul 10).

Net bond issuance will be cut to 362.9 trillion rupiah (S$32.2 billion), from the 712.9 trillion rupiah in the government’s initial outlook, Finance Minister Sri Mulyani Indrawati told parliament’s budget committee.

A slash in Indonesia’s bond offerings could support prices at a time when global interest rates are rising.

On top of strong revenues, Sri Mulyani said the government would also use some of the 156.9 trillion rupiah excess cash from 2022 to reduce bond offerings.

The total full-year debt issuance will be reduced to 406.4 trillion rupiah from a previous plan of 696.3 trillion rupiah.

The figures were based on a new assumption of a 2023 budget deficit of 2.28 per cent of gross domestic product, instead of the 2.84 per cent initially predicted.

In the first half of 2023, the government’s net bond issuance had reached 157.9 trillion rupiah.

Revenues in the January to June period had reached 1,407.9 trillion rupiah, outpacing the 1,255.7 trillion spending in the same period, bringing the budget to a surplus of 152.3 trillion rupiah.

Sri Mulyani said full-year revenues will likely surpass the target by about 7 per cent to reach 2,637.2 trillion rupiah, while spending will probably stand at 3,123.7 trillion rupiah, 2 per cent higher than originally planned.

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The country’s rupiah currency has come under pressure in the past week as markets expect the Federal Reserves to raise interest rates further to tame US inflation.

However, Indonesia’s benchmark 10-year bond yields have remained relatively stable at around 6.2 per cent.

Destry Damayanti, senior deputy governor of the central bank, told the same parliamentary hearing that the rupiah still has room to strengthen.

So far this year, the rupiah is still the best performing among emerging Asian currencies, trading more than 2 per cent up against the US dollar. REUTERS