January 08, 2008 |
|The Indonesian government is planning a global dollar-denominated bond issue that could raise up to $2bn as Asian sovereign issuers get ready to test the jittery global capital markets.|
The proceeds of what will be the region’s first public bond issue this year are expected to be used to reduce the budget deficit, which has a target of 1.7 per cent of gross domestic product this year.
Martin Panggabean, the chief economist at Bank Mandiri, Indonesia’s largest bank by assets, said: “This is not just about the money, it’s to establish a benchmark for the quality of the Indonesian economy.” The economy is expected to grow 6 per cent for a second consecutive year but the pricing of the bond could feel pressure from the US subprime crisis and rising oil prices.
Mr Panggabean said investor nervousness might be tempered by falling US interest rates and predictions that the economy would survive a US slowdown better than neighbouring countries such as Singapore.
Moody’s assigned a rating of Ba3 to the bond while Fitch has graded it BB-, both below investment grade.
Moody’s said Jakarta was developing a “track record of fiscal prudence” and that “structural reforms and improved policy management have bolstered the government’s credit fundamentals”.
The Philippines government is considering a $500m bond and Vietnam is believed to be planning an international bond issue.
Indonesian finance ministry officials said the bond was likely to be in two tranches, with maturity dates of 10 and 30 years.
Barclays Capital, HSBC and Lehman Brothers are in charge of the sale.
Sri Mulyani Indrawati, Indonesian finance minister, is leading efforts to market the bond, with roadshows scheduled for Hong Kong, Singapore, London and the US this week.
By John Aglionby in Jakarta