Bloomberg & Jakarta Globe

Government Raises Rp 950b With Sales of Islamic Bonds

Indonesia raised Rp 950 billion ($102.6 million) from sales of sukuk, or Islamic bonds, on Tuesday, the Finance Ministry said. That was less than the Rp 1 trillion the government originally sought.

The government sold Rp 55 billion of the notes, known as sukuk, due September 2015 to yield 8.69 percent, Rp 105 billion due in January 2017 to yield 9.19 percent and Rp 790 billion due in January 2025 at a yield of 10.51 percent.

The government is selling debt to fund a budget deficit.

The Islamic bonds sold today were of the Ijarah type. Muslim Shariah law forbids interest payments, so Ijarah sukuk are based on a leasing contract and pay a profit distribution to investors rather than interest.

The government also plans to sell Rp 3 trillion of three-year Islamic bonds to retail investors on Feb. 10, said Rahmat Waluyanto, director general of the Ministry of Finance’s debt-management office, last month. The notes will be on offer from Jan. 25 to Feb. 5.

PT Bank Mandiri, PT Bank Rakyat Indonesia, PT Danareksa Sekuritas and PT Mandiri Sekuritas were among 16 primary dealers appointed to help sell the Islamic bonds, according to a Finance Ministry document.

Finance Minister Sri Mulyani Indrawati said this month that the government planned to propose an increase in the targeted state budget deficit this year to the House of Representatives.

Sri Mulyani said the target would be raised to Rp 128.7 trillion, equivalent to 2.2 percent of the projected GDP, from Rp 98 trillion, or 1.6 percent of GDP, partly because of an expected increase in spending on fuel and electricity subsidies.

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