Indonesia Mulls $1bIslamic Bond Sale in Q3

By webadmin on 10:10 pm Jun 13, 2012
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The government may offer as much as $1 billion worth of dollar-denominated Islamic bonds in the third quarter this year in a bid to finance its budget deficit, a senior official said.

Rahmat Waluyanto, director of the Finance Ministry’s general debt management office, said the Islamic bond sale would be conducted after the Idul Fitri holiday, which marks the end of the Muslim fasting month.

Indonesia, a country with the world’s largest Muslim population, plans to sell between $650 million and $1 billion worth of bonds this year, Rahmat said.

“We will do it after Ramadan,” Rahmat said, referring to the Muslim fasting month, which ends on August 18 this year.

Indonesia has sold conventional and Islamic bonds in previous years to help plug its budget deficit, which is forecast to hit 2.23 percent of the gross domestic product this year. If the sale goes forward in August, it would be the country’s third Islamic dollar-denominated sale.

Rahmat said the size of the bonds would be the same as in the previous sale.

The government last sold global Shariah-compliant debt on in November last year. The $1 billion debt due in November 2018 was auctioned at a yield of 4 percent. That compared with the 8.8 percent yield on Indonesia’s debut sale of five-year Islamic dollar-denominated bonds in 2009, which raised $650 million.

The yield on the 4 percent notes due in 2018 increased four basis points, or 0.04 percentage points, to 4.17 percent on Monday, data compiled by Bloomberg showed.

Islamic bonds, known as sukuk, comply with Shariah law by using asset returns to pay investors instead of offering interest.