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February 28, 2009

Indonesia to raise $500m more from Samurai, global sukuk bonds

Indonesia, which just sold $3 billion of global bonds, may raise a further $500 million from a Samurai bond soon and issue a global sharia-compliant bond this year, an official said on Friday, to fund its budget deficit.

With elections this year and economic growth under pressure from the global slowdown, Indonesia has said it will spend 73.3 trillion rupiah ($6.11 billion) on a fiscal stimulus package that includes infrastructure projects and tax measures.

The package has contributed to a budget deficit now forecast to hit 2.5 percent of gross domestic product.

To pay for that, Indonesia's finance ministry sold $3 billion of 5-year and 10-year global bonds on Friday, which were part of a $4 billion medium-term note programme (MTN).

Finance ministry officials said that Indonesia would not tap its MTN programme again this year, but would return to the international capital markets with its planned Samurai bond and global sukuk.

Rahmat Waluyanto, treasury director-general at the finance ministry, said Samurai bonds worth $500 million may be issued within three months.

"It's part of our financing. It can be executed at any time, within three months at the earliest," he told reporters, adding that the issue would be "$500 million at the beginning, we're doing this one step at a time."

He added that Indonesia's first global sukuk is still expected to be issued this year.

This week, the finance ministry raised 5.556 trillion rupiah ($463 million) from its first retail sukuk bond issue, well above the 1.7 trillion rupiah target announced by the selling agents.

Anggita Abimanyu, head of the finance ministry's fiscal policy board, said on Friday that it made sense to tap the capital markets while possible in case conditions worsened and costs increased later on.

Referring to the global bonds sold on Friday, he said; "It's done in one go. It's done. This is because looking ahead, things are likely to get worse and the spread is likely to widen, which makes it costlier" for the borrower.

He also said that the 5-year and 10-year global bonds would be considered part of the total 100 trillion rupiah ($8.35 billion) gross debt issuance that Jakarta plans for this year.
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