Indonesia Prepares Panda Bond 1 Billion US Dollars to Close Part of the Deficit

Minister of Finance Purbaya Yudhi Sadewa. (Teddy Kurniawan VOI)

JAKARTA - The government plans to issue Panda Bonds of around US$1 billion to cover part of the budget deficit while expanding the country's financing sources.

Minister of Finance Purbaya Yudhi Sadewa said that Chinese investors' interest in yuan-denominated debt was quite good. However, the final results and the rate of return are still pending the closing of the bidding process.

"His interest is good, I just don't know what the end result will be. The closing of the book is good, but I'll check again," said Purbaya at the Presidential Palace Complex, Jakarta, Thursday, July 23.

Panda Bonds are foreign-issued debt securities in the Chinese market in renminbi or yuan.

Purbaya said the first issuance was limited to around US$1 billion to introduce Indonesia to investors in the Chinese market.

"We will issue around 1 billion dollars because this is still the first, for market introduction first," he said.

The government can reissue Panda Bonds with a larger amount if necessary.

Purbaya said the proceeds from the issuance would be used to finance part of the budget deficit. The instrument is also part of the diversification of government funding, which has so far relied heavily on US dollar-denominated bonds.

In addition to the Chinese market, the government has sought financing sources from Japan and Australia.

Purbaya also emphasized that Indonesia's debt letter obtained an AAA rating for issuance in the Chinese market. He denied the allegation that the rating was not correct.

"Triple A is true, there is a letter from there. Some say I'm lying. How is it a lie? There is a letter from there," he said.

The yield rate of the Panda Bond has not been determined because the price formation process is still ongoing.