Indonesia's Debt Chief Unveils Plan to Plug 2013 B1udget Deficit

       By Farida Husna and Andreas Ismar 

    JAKARTA--Indonesia's debt chief on Wednesday unveiled a timetable for tapping the international and domestic bond markets, against a backdrop of Indonesia's rising financing needs.

    "We will seek more from [the] domestic market than international. "We are raising our target issuance of domestic retail bonds to 20 trillion rupiah ($2 billion) from 15 trillion previously; likely in October," Robert Pakpahan told reporters after a parliamentary hearing on state budget revisions.

    Indonesia has kept its fuel prices low by aggressive subsidies. Its fuel subsidy bill has become a key driver of the country's ballooning budget deficit in recent years. As part of efforts to limit the deficit, the government wants to hike the price of low-octaine gasoline 44.4% to IDR6,500 a liter and diesel 22.2% to IDR5,500 a liter.

    Earlier in the day, newly installed Finance Minister Chatib Basri said that the government aims to cap its 2013 budget deficit at 2.5% of gross domestic product, higher than the 1.65% previously set, but significantly lower than an estimated 3.8% deficit if fuel prices aren't raised.

    If the government raises fuel prices by June, domestic inflation may jump to 7.2% by the end of the year from 4.9% estimated previously, officials said. That would push yields of domestically traded bonds higher, making it more expensive for the government to pay its debts.

    Mr. Pakpahan said Tuesday that a budget deficit of 2.5% of GDP means an addition of IDR60.8 trillion ($6.2 billion) in net bond issues.

    "We'll issue a global sukuk in September or October and introduce dollar bonds for domestic market in October. We're also looking at issuing another global bond somewhere in the second half," he added.

    Indonesia in April issued 10-year and 30-year dollar-denominated global bonds, raising $1.50 billion from each tranche after receiving $12.5 billion in total orders.

    Mr. Pakpahan didn't elaborate on the size of the dollar bond issuances.

    He added that Indonesia won't be tapping the Japanese market. "We're not issuing Samurai bond this year" due partly to [the] weaker yen, he said referring to yen-denominated bonds issued by foreign entities which target Japanese investors.

    Write to Farida Husna at and Andreas Ismar at