Adrian Wail Akhlas, Jakarta – Indonesia is looking to raise Rp 5 trillion (US$337 million) from a new series of government retail bonds, the Finance Ministry announced on Tuesday, as it looks to fund the battle against the coronavirus outbreak and deal with its economic fallout.
The ORI018 series has a fixed coupon rate of 5.7 percent per annum and a three-year tenor. The maturity date of the new bond series is Oct. 15, 2023.
The bond is offered online from Oct. 1 through Oct. 21, and is open to purchase by individuals with Indonesian citizenship for a minimum investment of Rp 1 million and a maximum investment of Rp 3 billion. The bond series is tradable between domestic investors after a two-month holding period.
"We will raise the [bond sales] target if significant numbers of people express interest in the [new bond issuance]," the Finance Ministry's director for sovereign debt papers, Deni Ridwan, told The Jakarta Post on Wednesday.
The government's July issuance of the ORI017 retail bond series has raised funds of Rp 18.33 trillion, the highest proceeds recorded from an online bond issue. The figure is 367 percent more than the original sale target of Rp 5 trillion, as retail investors have turned to safe-haven assets amid stock market volatility.
The coronavirus-induced economic downturn has sapped tax revenue, spurred government spending and necessitated record amounts in borrowing.
Meanwhile, the budget deficit is estimated to widen to 6.34 percent of gross domestic product (GDP), more than twice the original cap of 3 percent. The deficit has widened primarily as a result of the government issuing a Rp 695.2 trillion stimulus package to revive the economy.
Indonesia's GDP growth is projected to contract between 0.6 percent and 1.7 percent this year, which would mark the first annual contraction since the 1998 Asian financial crisis.
The majority of the funds to plug the deficit is to come from debt financing, with the government planning to raise more than Rp 1.5 quadrillion this year from bond sales. Around Rp 50 trillion to Rp 75 trillion of this amount is to come from retail bond issuances, according to the Finance Ministry.
Indonesia's debt is expected to increase significantly both this year and in 2021, with the debt-to-GDP ratio forecast to increase to 40 percent this year from 29.8 percent in 2019.