Government Debt Securities Management November 2011 Directorate - PowerPoint PPT Presentation

Government Debt Securities Management November 2011 Directorate General of Debt Management Ministry of Finance of The Republic of Indonesia www.dmo.or.id

Financing Budget Deficit Trend, 2004 – 2011 2 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* 2011** Govt Securities (Netto), % to GDP 1,1 0,5 0,9 1,3 0,1 1,6 0,7 1,8 1,8 Budget Defisit, % to GDP 0,3 0,8 1,1 1,4 1,7 1,8 1,5 1,8 2,1 Notes: * : Based on APBN 2011 ** : Based on APBN-P 2011 Other based on LKPP

Financing Trend, 2005 – 2011 3 Budget Deficit Financing (trillion rupiah) (% to GDP) 4,0 126,7 124,7 140 Govt Securities - net External Loan - net Others/Non-Debt - net 99,5 3,0 Budget Deficit 105 91,1 85,9 88,7 Budget Deficit, % to GDP (RHS) 2,0 1,8 57,2 1,6 70 46,8 1,3 36,0 29,1 49,8 1,0 0,9 28,6 35 16,5 0,7 20,0 4,1 5,0 0,1 - 9,1 0 (0,4) (4,57) -2,4 (13,2) (15,5) (23,9) (26,6) (1,0) -35 -70 (2,0) 2006+ 2007+ 2008+ 2009+ 2010++ 2011+++ Notes: + Based on Audited Budget Report ++ Based on Realization Budget 2010, Unaudited +++ Based on Budget 2011

Debt to GDP Ratio and Debt Service Ratio 4 2004 – 2011 Interest Expenses to Revenue and Debt to GDP Ratio (% of GDP) Expenditure Ratio (%) 14% 47% 50% 12% 39% 40% 10% 35% 33% 8% 13,17% 28% 12,40% 30% 26% 11,28% 11,05% 25% 24% 6% 9,52% 9,01% 9,11% 8,88% 4% 20% 12,79% 11,85% 10,53% 10,00% 8,97% 8,48% 8,07% 8,68% 2% 10% 0% 2005 2006 2007 2008 2009 2010 2011F* 2012** 0% to Revenue to Expenditure 2005 2006 2007 2008 2009 2010 2011F* 2012** Interest Expenses to Tax Revenue & Central Debt Service to GDP Ratio (%) Government Expenditure Ratio (%) 5,7% 6% 25% 5,0% 5% 4,6% 20% 4,0% 3,8% 4% 3,5% 15% 3,2% 3,2% 3% 18,1% 18,0% 10% 15,8% 14,9% 12,9% 12,8% 12,7% 11,7% 2% 5% 18,8% 19,3% 17,0% 14,2% 15,1% 12,2% 12,1% 12,1% 1% 0% 2005 2006 2007 2008 2009 2010 2011F* 2012** 0% to Tax Revenue to Central Gov't Expenditure 2005 2006 2007 2008 2009 2010 2011F* 2012** Notes: *) Based on budget 2010 realization Central Government Expenditure = Total Expenditure minus Transfer to Regions Debt Service = Interest Payment + Principal

Indonesia’s Credit Rating 5 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  “We have upgraded the sovereign credit ratings as the momentum in the economy is expected to be 2011: Ba1 (Ba1 Stable) sustained by steady domestic demand, a reasonable pace and sequencing of policy and structural reforms, 2010: Ba2 and rising foreign direct investment. Furthermore, the country’s debt position and reserve adequacy 2009: Ba3  Ba2 remain on an improving trajectory relative to most of its ratings peers” 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 Positive Outlook reflects Fitch's view that Indonesia's favourable macroeconomic prospects are likely 2011 : BB+ (BB+ Positive) to see the credit profile strengthen further over the next twelve to eighteen months, despite near-term 2010: BB  BB+ risks from inflation and potentially volatile capital flows” 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”.

Debt Securities Strategy 2011 6  Prioritizing issuance of government securities in domestic market  Supporting money market and capital market development to strengthen financial system  Promoting the creation of investment-oriented society  Supporting efficient monetary management  Foreign currency government securities issuance is complementary to domestic currency government securities issuance  Diversification of financing instruments to widen the market  Maintaining the presence of government financial instruments in global market  Avoiding crowding out in domestic market  Government securities issuance is taking into account the support to the implementation of Asset Liability Management with Bank of Indonesia  Continuing development of government securities program to enhance the depth and liquidity, in secondary market

Budget 2011 & 2012 7 Trillion IDR Billion IDR 2012 - 2012 - Proposed 2011 - Revised 2011 - % of % of Proposed 2011 - Budget Revised Budget GDP GDP Budget Budget Budget Total Revenue & Grants 1.169,9 16,2% 1.292,9 15,9% of which Tax Revenue 878,7 12,2% 1.019,3 12,6% Deficit 2011 (124.656,5) (150.836,7) (125.620,0) Non Tax Revenue 286,6 4,0% 273,5 3,4% 0,0% 0,0% Expenditure 1.320,8 18,3% 1.320,7 16,3% Amortization (133.767,8) (132.184,8) (152.991,0) of which Interest payment 106,6 1,5% 123,1 1,5% 0,0% 0,0% Subsidy 237,2 3,3% 208,9 2,6% 0,0% 0,0% External Loan (47.817,7) (47.234,7) (47.260,0) Primary Balance (44,3) -0,6% (2,5) -0,1% Overall Balance (deficit) (150,8) -2,1% 125,6 1,5% Govt Securities (incl Buyback) (85.950,1) (84.950,1) (105.731,0) Financing 150,8 2,1% 125,6 1,5% Two Steps Loan (11.724,8) (11.724,8) (9.016,4) Non Debt 25,5 0,4% (9,6) -0,1% Debt 125,3 1,7% 135,2 1,7% 0,0% 0,0% Financing Needs (270.149,1) (294.746,3) (287.627,4) Govt Securities (Net) 126,7 1,8% 134,6 1,7% 0,0% 0,0% Domestic Official Borrowing 1,5 0,0% 0,9 0,0% External Official Borrowing (Net) (2,8) 0,0% (0,3) 0,0% Financing Sources 270.149,1 294.746,3 287.627,4 Disbursement 44,5 0,6% 55,9 0,7% Program Loan 19,2 0,3% 16,8 0,2% Non Debt (537,9) 25.931,4 (8.819,2) Project Loan 25,3 0,3% 39,1 0,5% On lending 19,8 0,3% (9,0) -0,1% Repayment (47,2) -0,7% (47,2) -0,6% Debt (Gross) 270.687,0 268.814,9 296.446,6 Assumptions: Govt Securities 210.754,0 211.179,9 240.327,8 GDP (trillion) 7.226,9 8.119,5 Growth (%) 6,5 6,7 Program Loan 19.812,7 19.201,8 16.857,1 Inflation (%) 5,65 5,3 3-months SPN (% avg) 5,6 6,5 Project Loan 39.120,4 36.981,1 39.127,1 Rp / USD (avg) 8.700,0 8.800,0 Oil Price (USD/barrel) 95,0 90,0 Domestic Loan 1.000,0 1.452,1 134,6 Oil Lifting (MBCD) 0,945 950,0

List of Primary Dealers & Benchmark Series 8 1. Bank Mandiri 10. Citibank 2. BNI 11. Deutsche Bank 3. BRI 12. HSBC 4. BCA 13. JPMorgan 5. Bank Danamon 14. Standard Chartered Bank 6. Bank Permata 15. Bahana Sekuritas 7. BII 16. Danareksa Sekuritas 8. Bank CIMB Niaga 17. Mandiri Sekuritas 9. Panin Bank 18. Trimegah Securities Benchmark Series for 2011: FR0055 (15/09/16, 7.375%)  5Y  FR0053 (15/07/21, 8.250%)  10Y  FR0056 (15/09/26, 8.375%)  15Y  FR0054 (15/08/30, 9.500%)  20Y 