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Indonesia set to issue US$1 billion in panda bonds in China

The Southeast Asian country will offer the bonds in an attempt to better stabilise its national finances as the rupiah continues to fall

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Indonesia and China flags. Photo: Shutterstock
Ralph Jennings
Indonesia is expected to start issuing at least US$1 billion in yuan-denominated bonds in China within days or weeks, the Southeast Asian country’s national news agency Antara said on Friday, as part of an effort to stabilise domestic finances and reduce dependence on the US dollar.

The Ministry of Finance in Jakarta said the planned issuance of panda bonds – debt securities sold in China’s domestic bond markets – could start before mid-July, pending final signoffs in Beijing, Antara reported.

The Jakarta-based news agency said Indonesia would look to panda bonds “as part of a broader strategy to diversify its international financing sources and shield the Indonesian rupiah from global market volatility”.
Indonesian officials would need new funding sources to support government initiatives, but would hope to avoid issuing dollar-denominated bonds while the US currency was relatively strong and their own rupiah currency was weakening, said Song Seng Wun, an economic adviser based in Singapore.

“If you’re issuing bonds in US dollars and your currency is weakening, you’re going to pay a lot more,” Song said.

The rupiah has depreciated this year due to capital outflows from Indonesia’s domestic markets and global volatility in energy prices.

During an official visit to Beijing from June 16 to 19, Indonesian Finance Minister Purbaya Yudhi Sadewa received support from People’s Bank of China governor Pan Gongsheng to “fast track the necessary regulatory approvals”, Antara said in its report.

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