Government Debt Securities Management May 2012 Directorate General - PowerPoint PPT Presentation

Government Debt Securities Management May 2012 Directorate General of Debt Management Ministry of Finance of The Republic of Indonesia www.dmo.or.id

Milestones of Government Bond Market: Recapitalization triggered Bond 2 market to emerge in Indonesia 1 st Govt. Debt Recap Bonds traded Securities in secondary issuance for Govt. Debt Securities market for the first Banks budget financing Reprofiling on Recap time Recapitalisation Banks amounting program IDR180 trillion Regular Govt. Debt Debt monthly Securities Law Management 1 st Auction issuance Office enacted established 1 st Global Bond 2001 Issuance 1999 2004 2002 2003 2005 2008 2007 2006 2009 2010 1 st issuance Govt. Islamic Issued T- of Samurai Secs. Law Bills for 1 st Bond enacted time 1 st issuance of Retail Establishment of Sukuk 1 st issuance Primary Dealer of Sharia T- 1 st Debt Switching 2011 1 st Retail 1 st issuance of operation Bills Issued Bond 2012 Zero Coupon Sukuk for 1 st issuance Bond time

Financing Budget Deficit Trend, 2004 – 2012 3 Government securities are the major source of financing for the budget deficit, debt refinancing and infrastructure support Budget Deficit Financing 2,50 2,00 1,50 1,00 0,50 0,00 2004 2005 2006 2007 2008 2009 2010 2011* 2012** Budget Defisit, % to GDP 1,1 0,5 0,9 1,3 0,1 1,6 0,7 1,3 2,2 Govt Securities (Netto), % to GDP 0,3 0,8 1,1 1,4 1,7 1,8 1,5 1,7 1,9 Notes: ** : Based on Revised Budget 2012 * : Based on realized budget (preliminary figure) Other based on LKPP

Financing Trend, 2006 – 2012 4 Budget Deficit Financing (trillion IDR) 200 190,1 150 100 90,1 88,61 50 49,8 46,8 29,1 4,1 0 -50 2006+ 2007+ 2008+ 2009+ 2010+ 2011++ 2012+++ Govt Securities - net 36,0 57,2 85,9 99,5 91,1 119,9 159,6 Domestic Loan - - - - - 0,3 1,0 External Loan - net (26,6) (26,6) (18,4) (15,5) (4,57) (19,2) (4,4) Others/Non-Debt - net 20,0 9,1 16,5 28,6 5,0 28,3 33,9 Budget Deficit 29,1 49,8 4,1 88,61 46,8 90,1 190,1 Notes: + Based on Audited Budget Report ++ Based on Realized Budget 2011 (preliminary figure) +++ Based on Revised Budget 2012

Debt to GDP Ratio and Debt Service Ratio 5 2005 – 2012 Interest Expenses to Revenue and Debt to GDP Ratio (% of GDP) Expenditure Ratio (%) 14% 47,34% 50% 12% 39,00% 40% 35,17% 33,06% 10% 28,32% 26,11% 24,28% 22,97% 8% 13.17% 30% 12.40% 11.28% 11.05% 6% 9.01% 8.88% 8.67% 7.71% 20% 4% 12.79% 11.85% 10.53% 10.00% 8.97% 8.48% 7.20% 7.61% 2% 10% 0% 2005 2006 2007 2008 2009 2010 2011* 2012** 0% to Revenue to Expenditure 2005 2006 2007 2008 2009 2010 2011* 2012F** Interest Expenses to Tax Revenue & Central Debt Service to GDP Ratio (%) Government Expenditure Ratio (%) 5,7% 25% 6% 5,0% 4,6% 5% 20% 4,0% 3,8% 4% 15% 3,2% 3,2% 3,1% 18,1% 18,0% 3% 10% 15,8% 14,9% 12,8% 12,7% 11,6% 10,6% 2% 5% 18,8% 19,3% 17,0% 14,2% 15,1% 12,2% 10,7% 11,6% 1% 0% 2005 2006 2007 2008 2009 2010 2011* 2012F** 0% to Tax Revenue to Central Gov't Expenditure 2005 2006 2007 2008 2009 2010 2011* 2012F** Notes: * Based on Revised Budget 2012

Indonesia’s Credit Rating 6 Moody’s, S&P, Fitch and JCR have all recently upgraded Indonesia’s credit rating based on Indonesia’s sustained strong econom ic growth Moody’s  “ Indonesia’s cyclical resilience to large external shocks points to sustainably high trend growth over the 2012: Ba1  Baa3 (Baa3 Stable) medium term. A more favoreable assessment of Indonesia’s economic strength is underpinned by gains in 2010: Ba2 investment spending, improved prospects for infrastructure development following key policy reforms, 2009: Ba3  Ba2 and a well- managed financial system.” 2008: Ba3 2007: B1  Ba3 S&P  “ The main factor supporting this decision is continuing improvements in the government's balance sheet 2011 :BB -> BB+ (BB+ Positive) and external liquidity, against a backdrop of a resilient economic performance and cautious fiscal 2010 : BB management” 2009: BB-  “S&P noted the improving government's financial performance as reflected by declining government debt 2008: BB- burden and increase the accumulated foreign reserves as the key to improving Indonesia's rating” 2007: BB- Fitch  "The upgrades reflect the country's strong and resilient economic growth, low and declining public debt 2011 : BB+  BBB- (BBB- Stable) ratios, strengthened external liquidity and a prudent overall macro policy framework" 2010: BB  BB+ 2009: BB 2008: BB-  BB 2007: BB- JCR  “The upgrading reflects Indonesia's ( i) enhanced political and social stability along with the progress in 2010: BB+  BBB- (BBB- Stable) democratization and decentralization (ii) sustainable economic growth outlook underpinned by solid 2009: BB  BB+ domestic demand (iii) alleviated public debt burden as a result of prudent fiscal management, (iv) 2008: BB reinforced resilience to external shocks stemming from the foreign reserves accumulation…” 2007: BB R&I  “Supported by private consumption, Indonesia is expected to secure a real gross domestic product (GDP) 2010: BB+ (BB+ Positive) growth rate in the 4% range for 2009. The economic structure, which depends substantially on domestic 2009: BB+ demand, cushioned the negative impact resulting from the drop in external demand that was triggered by 2008: BB+ the global recession”. 2007: BB  BB+  “The government has maintained disciplined fiscal management since President Yudhoyono assumed office in 2004. Because of economic stimulus measures centered on tax reductions, the size of the fiscal deficit is expected to expand slightly in 2009, to 2.4% of GDP”.

Budget 2011 & 2012 7 Trillion IDR 2012 - 2012 - 2011 - % of % of Revised % of Item Budget Realized Budget* GDP GDP Budget GDP (trillion IDR) (trillion IDR) Total Revenue & Grants 1,199.5 16.9% 1,311.4 16.2% 1,344.5 16.6% of which Tax Revenue 872.6 12.3% 1,032.6 12.7% 1,016.2 12.5% Non Tax Revenue 324.3 4.6% 277.99 3.4% 341.14 4.2% 0.0% 0.0% Expenditure 1,289.6 18.1% 1,435.4 17.7% 1,534.6 18.9% of which Interest payment 93.3 1.3% 122.2 1.5% 117.8 1.5% 0.0% 0.0% 0.0% Subsidy 294.9 4.1% 208.9 2.6% 273.2 3.4% Primary Balance 3.1 0.0% (1.8) 0.0% (72.3) -0.9% Overall Balance (deficit) (90.1) -1.3% (124.0) -1.5% (190.1) -2.2% Financing 129.3 1.8% 124.0 1.5% 190.1 2.3% Non Debt (Net) 28.3 0.4% (9.5) -0.1% 33.9 0.4% Debt 101.0 1.4% 133.6 1.6% 156.2 1.9% 0.0% 0.0% 0.0% Govt Securities (Net) 119.9 1.7% 134.6 1.7% 159.6 1.9% 0.0% 0.0% 0.0% Domestic Official Borrowing 0.3 0.0% 0.9 0.0% 1.0 0.0% External Official Borrowing (Net) (19.2) -0.3% (1.9) 0.0% (4.4) -0.1% Disbursement 31.7 0.4% 54.3 0.7% 53.7 0.7% Program Loan 13.6 0.2% 15.3 0.2% 15.6 0.2% Project Loan (Gross) 18.1 0.3% 39.0 0.5% 38.1 0.5% On lending (3.6) 0.0% (8.9) -0.1% (8.4) -0.1% Amortization (47.3) -0.7% (47.2) -0.6% (49.7) -0.6% Assumptions: GDP (trillion) 7,114.0 8,119.8 8,542.6 Growth (%) 6.7 6.5 Inflation (%) 5.3 7.0 3-months SPN (% avg) 4.8 6.5 5.0 Rp / USD (avg) 8,776.0 8,800.0 9,000.0 Oil Price (USD/barrel) 111.6 90.0 105.0 Oil Lifting (MBCD) 898.1 950.0 930.0 * Preliminary number - Realized budget as of 3 January 2012

Gov’t Debt Securities Issuance Plan 2012 8 Gov’t Debt Operation – Policy Combination 2012 - Revised 2012 - Budget Budget  Issuing in domestic market will be prioritized IDR $ USD IDR $ USD  Issuing in variety of tenor (trillion) (billion) (trillion) (billion)  Issuing in global market (Global Bond and Samurai Deficit (124,0) (13,39) (190,1) (20,52) Bond) Amortization (167,6) (18,09) (161,9) (17,47)  Maximum foreign issuance 18% from total gov’t debt External Loan (47) (5) (50) (5) securities issuance Govt Securities (incl Buyback) (120) (13) (112) (12)  Buyback, debt switching, direct transaction Domestic Loan (0,14) (0,02) (0,14) (0,02)  Initiatives strategic :USD issuance domestically & liability management (USD bonds) Non Debt Financing Expenditures (18,77) (2,03) (26,62) (2,87) Two Steps Loan (8,9) (0,96) (8,4) (0,91) Indicative Tenor in Benchmark Series for Financing Needs (319,3) (34,5) (387,0) (41,8) Domestic Market 2012 Financing Sources 319,3 34,5 387,0 41,8 FR 60 – 5 Y 1 y - 30 % *   Non Debt (Gross) 9,2 1,00 60,6 6,54 3 y - 7 % * ^ FR 61 – 10 Y   Debt (Gross) 310,1 33,47 326,4 35,23 5 y - 16 % *  FR 59 – 15 Y  Govt Securities 254,8 27,5 271,6 29,3 10 y - 18 % *  FR 58 – 20 Y  Program Loan 15,3 1,6 15,6 1,7 15 y - 15 % *  Project Loan (Bruto) 39,0 4,2 38,1 4,1 > 20 y - 14 % *  Domestic Loan 1,0 0,1 1,1 0,1 * as percentage of total gross securities issuance in the domestic market Exchange Rate Assumption (IDR/USD 1) a.o May 22, 2012 : IDR 9.265 ^ Retail bond