Surabaya. The Indonesian government has issued Rp 120 trillion ($12.84 billion) in Islamic bonds, better known as sukuk, over the past four years, which the Finance Ministry attributes to an “excessive” demand among Muslim investors.
The ministry’s director for Shariah financing, Dahlan Siamat, said the government issued its first sukuk in 2008, and as of Thursday had issued a total of Rp 120 trillion in sukuk bonds.
“The achievement has been supported by excessive demands for sukuk in the domestic market,” Dahlan said in Surabaya on Thursday. “And the potential for state sukuk in the country is developing rapidly, given that 80 percent of Indonesians are Muslims, and there remains a large potential for them to become investors.”
Indonesia has been selling conventional and Islamic bonds the past year to help plug its budget deficit. The country’s budget shortfall is forecast to reach 2.23 percent of the gross domestic product this year, according to a revised 2012 state budget.
Dahlan added that as of April, the government recorded a total of Rp
102.88 trillion in outstanding sukuk, or the amount of sukuk that the
government has yet to fully pay back.
Sukuk comply with Shariah law by using asset returns to pay investors instead of offering interest. Indonesia is currently the third largest sukuk issuer, after Malaysia and Saudi Arabia.