The government is looking to raise Rp 10 trillion (US$711.6 million) from a new series of domestic retail bonds to fund the country’s fiscal deficit and COVID-19 vaccination program, the Finance Ministry announced on Monday. “The proceeds will be used to fund the pandemic handling and economic recovery [efforts] including the mass vaccination [program],” financing and risk management director general Luky Alfirman of the Finance Ministry said during the launch of the new bond issue on Monday. The ORI019 bond series has a fixed coupon rate of 5.57 percent per annum and a three-year tenor, with a maturity date of Feb. 24, 2024. The retail bond is available to buy online from Jan. 25 to Feb. 18 and is open to purchase by Indonesian individuals for a minimum investment amount of Rp 1 million and a maximum investment amount of Rp 3 billion. The bond series is tradable on the domestic secondary market starting on April 15. The fixed coupon rate is “very attractive” for retail investors, as bank interest rates remained relatively low during the coronavirus pandemic, head of fixed income research Handy Yunianto at Mandiri Sekuritas told The Jakarta Post on Monday.
“Although the coupon rate is lower than its predecessor, ORI018, but the spread of ORI019 to the deposit rate and Bank Indonesia’s seven-day reverse repo rate is higher than ORI018,” he said, noting that the government’s target was realistic despite the current economic downturn. The government plans to issue six retail bond series this year, starting with the ORI019, after raising Rp 76.93 trillion through the issuance of seven retail bond series last year. It also plans to issue Rp 27.58 trillion in sukuk (sharia-compliant bonds) this year to finance 870 infrastructure development projects, including projects under the Transportation Ministry and the Public Works and Housing Ministry. The government's broader plan is to raise around Rp 1 quadrillion through sovereign bond issues this year to help revive the coronavirus-battered economy and finance the fiscal deficit, which is expected to reach 5.7 percent of gross domestic product (GDP) this year. The estimate lower than the 6.07 percent of GDP booked last year, more than twice the initial deficit cap of 3 percent. The economic downturn as a result of the health emergency has sapped tax revenue, spurred government spending and necessitated a record amount of borrowing. Indonesia’s debt-to-GDP ratio is forecast to increase significantly to 40 percent in 2021 from 30 percent in 2019.
Indonesia plunged into recession for the first time in two decades during the third quarter of 2020 as the pandemic upended economic activity, but growth is expected to rebound this year driven by the low-base effect and the recovery of domestic consumption, as well as global economic recovery. The government is currently trying to secure around 426.8 million doses of COVID-19 vaccines in its bid to end the public health emergency and get the economy moving by inoculating around 181.5 million citizens to achieve herd immunity. The majority of Indonesia’s vaccine supply consists of CoronaVac by Chinese biopharmaceutical company Sinovac Biotech, with the remainder from US vaccine manufacturer Novavax. The country’s nationwide vaccination program, which involves 8,796 registered medical facilities, commenced on Jan. 13 with President Joko Widodo receiving the first jab.
