Indonesia Eyes $1 Billion Panda Bond Issuance to Diversify Debt Market

The Indonesian government plans to issue Panda Bonds, yuan-denominated debt securities, worth around US$1 billion to cover part of the budget deficit and diversify its financing sources. Minister of Finance Purbaya Yudhi Sadewa stated that Chinese investors have shown considerable interest in yuan-denominated debt. However, the final results and the yield rate are still pending the conclusion of the bidding process. "Their interest is good. I'm not sure about the final outcome yet. The book closing is proceeding well, but I will recheck," Purbaya said at the Presidential Palace Complex in Jakarta on Thursday, July 23. Panda Bonds are foreign-issued debt securities in the Chinese market denominated in renminbi, or yuan. Purbaya mentioned that the first issuance will be limited to approximately US$1 billion as a market introduction for Indonesia to investors in the Chinese market. "We will issue around $1 billion because this is still the first one, for market introduction first," he explained. The government may reissue Panda Bonds with larger amounts if necessary. The proceeds from the issuance will be used to finance a portion of the budget deficit. This instrument also serves to diversify the government's funding sources, which have historically relied heavily on US dollar-denominated bonds. In addition to the Chinese market, the government is also seeking financing sources from Japan and Australia. Purbaya emphasized that Indonesia's debt instruments have obtained an AAA rating for issuance in the Chinese market, refuting allegations that the rating is incorrect. "Triple A is true; there is a letter from there. Some say I'm lying, but how can it be a lie? There is a letter from there," he asserted. The yield rate for the Panda Bond has not yet been determined as the price formation process is still ongoing.