Indonesia to offer first diaspora, sustainable bonds in 2020

DIASPORA - JAKARTA. Indonesia plans to sell two new types of bonds next year, including one tailored for Indonesians living overseas, to diversify its bond market, a finance ministry official said on Wednesday.

The 2020 state budget has an estimated deficit of 307.2 trillion rupiah ($21.82 billion), or 1.76% of gross domestic product (GDP), but Indonesia typically raises a lot more through bond sales and multilateral loans to roll over maturing debts.

The government will sell diaspora bonds and Sustainable Development Goals (SDG) bonds next year, Luky Alfirman, who heads the ministry's budget financing department, told the parliament's finance commission.

"Our intention is to obtain funding from the diaspora community. So Indonesians abroad can participate in our bond market," Alfirmans said, adding that the government will offer savings bonds online for the first sale.

The SDG bonds are part of the government's thematic issuance, according to Alfirman's presentation to the commission, though he did not elaborate. Such bonds are usually sold to raise funds for government programmes to meet the SDGs.

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In addition to the two new bonds, the government will also expand issuance of endowment-linked Islamic bonds in 2020, Alfirman said. Indonesia first sold such bonds, called waqf-linked sukuk, in 2018 though only for a very small amount.

"This is part of our development of social based investment," Alfirman said.

The government will continue to frontload bond sales in the first six months of 2020, Alfirman said, a strategy it has been implementing in recent years to navigate global uncertainty.

Around 15%-20% of the total debts will be issued in foreign currencies next year, smaller than the 23% composition of foreign currency debts in 2019, Alfirman said.

The government also has plans to convert some U.S. dollar denominated multilateral loans into euro next year to reduce interest payments, Scenaider Siahaan, the finance ministry's director of loans and grants, said.