Issuance Of SBN Increases In 2025, Economists Say It Needs IDR 1,260 Trillion To Cover The Deficit

Head of Bank Permata economist Josua Pardede. (Photo: Doc. ANTARA)

JAKARTA - Head of Bank Permata Economist Josua Pardede said that based on the 2025 State Revenue and Expenditure Budget Draft (RAPBN), the issuance of Government Securities (SBN) is expected to increase substantially in the coming year, mainly driven by SBN which will mature in 2025.

During the pandemic period, Josua conveyed that the state budget deficit was widening and financed by the massive issuance of SBN, with bonds due between 2024 - 2026.

"The maturity trend of bonds will continue until at least 2026. According to our calculations, around Rp1,260.6 trillion issuance of gross SBN is needed to cover the deficit targeted in the 2025 State Budget," he explained to VOI, Thursday, August 22.

Josua said that although the supply of SBN in 2025 is expected to increase significantly compared to 2024, and his party is still anticipating a decrease in the yield of SBN in the coming year.

"This estimate assumes that by 2025 there will be foreign capital inflows into the SBN market, driven by risk-on sentiment that appears amid the decline in global policy interest rates, especially the Fed's decline in FFR," he said.

According to Josua, this development can increase investor risk appetite, thereby increasing demand for financial assets in developing countries, including Indonesia.

Josua conveyed the result, this allowed Bank Indonesia to lower the BI-rate further by 75 bps in 2025, continuing the expectations of lowering the BI benchmark interest rate by 50 bps in the second semester of 2024, thus potentially reducing the SBN yield further.

Josua explained that the increasing demand for foreign investors for SBN, good Indonesian economic prospects, and the potential decline in BI-rate will mitigate the impact of increasing SBN issuance on yields. This will also contribute to the trend of appreciation for the Rupiah in 2025.

In addition, if there are economic or market conditions that are not good, Josua hopes that the government can maintain stability through the use of SAL.

"Considering the condition of the SBN market in 2025, we estimate that the yield of the 10-year SBN tenor will range from 6.10 percent - 6.40 percent, a decrease from our projection in 2024 which is 6.50 percent - 6.70 percent," he said.

"We estimate that the Rupiah will be appreciated to be between Rp. 14,900-Rp. 15,300 per US dollar by the end of 2025, compared to our estimate in the range of Rp. 15,500-Rp. 15,900 per US dollar at the end of 2024," he concluded.