Indonesia, which has been running a budget deficit since the Asian monetary crisis more than a decade ago, plans to sell 11 percent more bonds next year to finance its budget shortfall.
The government plans to raise total net bond sales to Rp 177.3 trillion ($19 billion) next year compared with Rp 159.6 trillion this year, with the country aiming to sell more notes even as the budget deficit is projected to narrow next year.
“The government will sell rupiah bonds and dollar-denominated bonds next year,” the government said in a budget statement.
The document also showed that the government would sell regular and retail bonds in the domestic market.
The government has been selling bonds in the past few years to plug its budget deficit, which is forecast to narrow to 1.6 percent of gross domestic product, or the equivalent of Rp 150 trillion, next year. The government set the budget deficit at 2.3 percent, or Rp 190 trillion, this year.
Rachmat Waluyanto, a former director general of the debt management office at the Finance Ministry, recently told the Jakarta Globe that Indonesia needed to sell more bonds in the domestic market if the government wanted to deepen the country’s shallow debt market.
Deepening the debt market means the country has to offer more notes — such as regular notes, retail bond market and Islamic bonds — to the Indonesian market.
Indonesia, a country with the world’s largest Muslim population, has been familiar with Islamic bonds or bills, known as sukuk.
The country aims to raise $750 million by selling yen bonds, or so-called samurai bonds, and $1 billion in US currency bonds in October.
That would lift total bond sales to almost $2 billion later this year. The government raised $2.5 billion by selling dollar-denominated bonds in April.
Robert Pakpahan, acting chief of the debt management office at the Finance Ministry, said last week that government officials would travel overseas to gauge demand on the country’s plans to sell a combination of samurai and dollar Islamic bonds.
Sukuk bonds comply with Shariah law by using asset returns to pay investors instead of offering interest, which is forbidden by Islam.