Indonesia may issue Islamic treasury bills and retail sukuk this year to diversify funding sources, develop the Islamic debt market and finance the state budget deficit, finance ministry officials said on Monday.
The ministry also said it expected to issue conventional bonds for retail investors in July or August, with maturities of up to five years.
Indonesia, the world’s most populous Muslim country, has been relatively slow to develop its Islamic markets, lagging Malaysia and Singapore. It stepped up its efforts last year by eliminating double taxation of such sharia products, as this had hampered growth of the industry.
The finance ministry currently issues conventional treasury bills, with maturities of up to 12 months — usually at least once a month via debt auctions — while Bank Indonesia (BI), the central bank, issues treasury bills called central bank certificates (SBIs) with a maximum maturity of six months.
“We are still in talks with BI including on the maturity” of the Islamic T-bills, Dahlan Siamat, the finance ministry director in charge of Islamic debt, told reporters.
“If it can be issued this year, that will be good,” said Rahmat Waluyanto, the ministry’s head of debt management unit, referring to Islamic T-bills.
BID TO CONTAIN HOT MONEY FLOWS
The finance ministry’s decision to consider issuing Islamic treasury bills follows moves by the central bank to reduce the frequency of its SBI auctions as it tries to contain hot money flows, shift money into longer-dated paper and spur bank lending.
The central bank is in the process of changing its auction schedule. It will hold its SBI auctions once a fortnight, instead of once a week, until late May, and then once a month starting in June.
Central bank officials have said they expect to rely less on SBIs for monetary operations and instead use more finance ministry debt securities.
Ministry officials also said they expected to issue Islamic debt, or sukuk, for retail investors around November.
The ministry last sold sukuk to retail investors in February, raising 8 trillion rupiah ($888.3 million) in a three-year issue that yielded 8.7 percent — well above the one-year bank deposit rate of about 6.5 percent.
The finance ministry has said it plans to raise 176.2 trillion rupiah from bond issues this year, including both conventional and Islamic debt.
The proceeds would be used to finance the budget deficit, which under the approved budget is forecast at 1.6 percent of GDP this year, although under the revised budget it is forecast at 2.1 percent of GDP. ($1=9005 Rupiah)
source : guardian