Presentation is loading. Please wait.

Presentation is loading. Please wait.

January 2011 Edition. Table of Contents Chapter 1 Background, Debt Policy & Management and its Objectives, Debt Instruments, Legal Basis 1. Background.

Similar presentations


Presentation on theme: "January 2011 Edition. Table of Contents Chapter 1 Background, Debt Policy & Management and its Objectives, Debt Instruments, Legal Basis 1. Background."— Presentation transcript:

1 January 2011 Edition

2 Table of Contents Chapter 1 Background, Debt Policy & Management and its Objectives, Debt Instruments, Legal Basis 1. Background (1) 2. Background (2) 3. Debt Policy & Management and its Objectives 4. Debt Instruments (1) 5. Debt Instruments (2) 6. Debt Management: Legal Basis Chapter 2 State Budget, Deficit and its Financing 7. State Budget, fiscal year 2010 & 2011 8. Fiscal deficit and State Budget Financing, 2000- 2011 9. Global Deficit and Deficit in Various Countries, 2007-2010 10. Financing Development, 2008-2011 11. Debt Financing Development, 1998-2011 12. Realization of Government Securities, 2010 13. Program Loans, 2006-2010 14. Foreign Loans Financing 2001-2011 15. Project & Program Loans Drawing, 2006-2009 16. Project Loans Drawing, 2010 17. Project Loans Drawing, 2010 (chart) Chapter 3 Debt Portfolio – Outstanding, Debt Maturity Profile, Government Securities Development and Foreign Loans 18. Government Debt Outstanding, 2001-2010 19. Trend of Government Debt Outstanding, 1998- 2010 20. Debt Maturity Profile as of Dec 31th, 2010 21. Government Securities, December 2007 – Dec 31th, 2010 22. Foreign Loans by Creditor Types, 1998-2010 23. Foreign Loans by Creditor Types, 2001-2010 24. Foreign Loans by Sector, 2005-2010 25. Foreign Loans by Sector, 2005-2010 (chart) 26. Government Debt by Currency, 2001-2010 27. Government Debt by Currency, 2000-2010 28. Foreign Loans Drawing by Financing Type, 2006- 2011

3 Table of Contents Chapter 4 Debt Management’s Performance – Debt Performance Measurement and Comparison, Loan Disbursement, Government Debt Securities Re-profiling 29. Debt-to-GDP Ratio, 1999-2011 30. Debt-to-GDP Ratio – Countries Comparison, 1999-2010 31. Debt-to-GDP Ratio in Various Countries, 2008- 2014 32. Maturity Profile of Tradable Government Securities, end of 2001 and Dec 31th, 2010 33. Debt Switching and Govt. Securities Buyback 34. Debt Swap to Reduce Debt 35. Restructurisation 2003 36. Restructurisation 2006 37. Restructurisation 2008: interest structure restructurisation SU-002 & SU-004 38. Foreign Loans Disbursement Performance, 1997 – Dec 31th, 2010 39. External Debt Service: Countries Comparison in 2008 and 2003-2008 40. Debt Service to International Reserve Ratio, 1999-2010 41. Debt-to-GDP Ratio: Countries Comparison in 2008 and 2003-2010 42. External Debt to GDP Ratio in 2008 and 2003- 2008 43. Debt per capita in Various Countries, 2001- 2010 44. Debt per capita: Countries Comparison in 2008 and 2003-2010 45. Debt to revenue ratio: Countries Comparison in 2008 and 2003-2008 46. Interest payment to GDP ratio in Various Countries, 1998-2007 Chapter 5 Costs of Borrowing – Cost of Fund, Yield Curve, External Debt’s Costs 47. Interest to revenue and expense ratio, 2001- 2011 48. Interest to Total Debt ratio, 2001-2011 49. Interest payment to revenue ratio in Selected Countries, in 2008 and 2003-2008

4 Table of Contents 50. Interest Payment Realization 2002-2010 51. Program Loans: Cost Structure 52. Cost of Fund of Government Securities, Rupiah denominated 53. Yield Curve Trend of Govt. Debt Securities, foreign currency denominated Chapter 6 Performance of Secondary Market for Govt. Securities – Trading Volume, Govt. Securities’ Ownership Structure 54. Average Daily Trading of Rp denominated Govt. Securities in Secondary, as of Dev 31 th 2010 55. Govt. Securities Ownership Structure by Bank and Non Bank, as of Dec 31 th 2010 56. Govt. Domestic Securities Ownership Structure by Investor Types 57. Govt. Domestic Securities Ownership share by Investor Types 58. Govt. Securities Ownership by foreign investor classified by maturity 59. Spread over 5 years US Treasury Bill 60. Spread over 10 years US Treasury Bill 61. Spread over Feb 38 US Treasury Bill Chapter 7 Rating, Supreme Audit Agency Opinion, HIPICs and Conclusion 62. Indonesian Credit Rating 63. Indonesian Credit Rating Development (1) 64. Indonesian Credit Rating Development (2) 65. Indonesian Sovereign Rating – Performance Upgrading (1) 66. Indonesian Sovereign Rating – Performance Upgrading (2) 67. Supreme Audit Agency Opinion on Government’s Financial Report 2009 68. GDP per capita of HIPICs and Debt-relief Countries 69. Conclusion

5 Chapter 1 Background, Debt Policy & Management and its Objectives, Debt Instruments, Legal Basis

6 1 Background (1)  Debt management and policy is an integral part of fiscal policy which also constructs economic policy and management in general.  Ultimate objectives of economic management:  Welfare creation and maintenance in the form of:  Reducing unemployment.  Poverty alleviation.  Spur more growth in the eonomy.  Security and stability enhancement.  Debt is materialized if state budget is in deficit.

7 2  Deficit financing through debt has been perceived to be a standard approach in most of the countries in our modern world:  Debt is primary tool to fill fiscal gap and to refinance matured debts;  Debt refinancing will end up with new and better debt profile in term of risk and fee.  Government debt, in nominal term, has increased due to:  Legacy debts that need to be refinanced;  Inevitable effect of currency and banking crises in 1997/1998:  Exchange rate depreciation;  Banking bail out and recapitalization; Part of proceed coming from asset recovery used for debt/banking recap securities repayment.  Fiscal deficit financing is also a result of political process and of political decision made in joint by the Government and the Parliament intended for:  Supporting fiscal stimuli through development activity in infrastructure, agriculture, energy, and another kind of “pump priming” project;  Sustaining people’s welfare program such as PNPM, BOS, Jamkesmas, Raskin, PKH, subsidy;  Supporting real sector’s activity for instance through tax incentive;  Maintaining 20% of state budget to back up education sector;  Enhancing army and defense system;  Continuing bureaucratic reform.  Access to soft loans coming from multilateral donors has been restricted by:  Indonesia is no longer considered as low income country;  Upper limit of foreign loans can be received by an economy. Background (2)

8 3 Debt Policy & Management and its Objectives  Objective In the long run, debt policy and management are directed to minimize cost and maintain manageable level of risk.  Policy  There is no such thing as conditionality imposed by donors;  The Government only receives loans with long maturity & grace period and low cost;  From 2004 onward, loan repayment has been set to be larger than its disbursement;  Relying more on government securities in domestic currency and market:  Self reliance principle in fiscal deficit financing;  Pursuing further deepening in domestic market by enlarging potential investor and diversifying instrument;  Help to spur efficiency in liquidity management by, for instance, issuance of money market instrument.  Gaining a larger access to international market (global bond, sukuk global, samurai bond) in order to strengthen Government’s bargaining power in its role as a Borrower

9 Debt Instruments (1)  Government Loan consists of external and domestic debt:  External Loan World Bank, Asian Development Bank, Islamic Development Bank and bilateral donors (Japan, Germany, France, etc.) and Export Credit.  Program Loan: Intended for budget support and its disbursement is a function of the realization of stated policy matrix aiming the targets set up in MDGs scheme (poverty alleviation, education, and corruption eradication), people empowerment and also policy related with climate change and infrastructure development.  Project Loan : To support infrastructure project in transportation, energy etc and also poverty alleviation project.  Domestic Loan  Government Regulation No. 2 Year 2006 on Loan/Grant Procurement Procedure and Loan/Grant Channeling;  Coming from state-owned enterprise, local government and local state-owned enterprise;  To finance policy related with the effort to support local industry, infrastructure project for public service and investment generating revenue project. 4

10  Government securities (SBN) in local and foreign currency denominated, tradable and non-tradable, fixed and variable:  Government Debt Securities/Surat Utang Negara (SUN)  T-Bills: short-term (up to 1 year);  Govt. Bond (> 1 year)  Coupon Bond  Tradable: ORI, FR/VR bond, Global bond  Non tradable: SRBI for bank recap, bond issued for Bank Indonesia’s recap and re-structurization of banking industry  Zero coupon  Government Islamic securities/Sukuk (SBSN) in domestic and foreign currency denominated in the scheme of Ijarah, Musyarakah, Istisna, etc  Islamic T-Bills;  IFR/Ijarah Fixed Rate; Global Sukuk; SDHI/Indonesian Haj Fund Sukuk. 5 Debt Instruments (2)

11 6 Debt Management: Legal Basis  Laws and Regulations:  Law Number 19/2008 on Government Islamic Securities  Law Number 24/2002 on Government Securities  Government Regulation No. 2 Year 2006 on Loan/Grant Procurement Procedure and Loan/Grant Channeling  Government Regulation No. 54 Year2008 on Domestic Loan Procurement Procedure and Domestic Loan Channeling  Setting up, among other things, good governance principle:  Foreign debt cannot be separated from state budget and subject to the approval from parliament  A good policy coordination (MoF, Ministry of Planning & BI) is essential for having sound debt management  Close and efficient supervision on government securities’ trading activities in secondary market by the stock market authority  Accountability and transparency in whole range of debt management span

12 Chapter 2 State Budget, Deficit and Its Financing

13 State Budget, Fiscal Year 2010 & 2011 7 [ Trillion IDR ]

14 Fiscal Deficit and State Budget Financing, 2000-2011 Source: MoF  Since 2005, government securities have been played role as primary instrument of financing  Refinancing strategy to achieve a better debt profile explains the surge of government securities in 2005-2010 Notes: State Budget 2000-2009 used PAN/LKPP-Audited figures + State Budget (Revision) 2010 8

15 9 Global Deficit and Deficit in Various Countries, 2007-2010 Source : JPMorgan as of June 2009  Fiscal deficit in Indonesia is lower than other countries.  Fiscal rule stated on Law Number 17/2003 has fixed upper limit of deficit in the level of 3% of GDP. In consequence, additional debt to finance fiscal deficit is also limited.

16 Financing Development, 2008-2011 Notes: State Budget 2008-2009 PAN/LKPP - Audited *) State Budget (Revision) 2010 10

17 Debt Financing Development, 1998-2011  Net additional foreign loan recorded as negative since 2004  Total debt financing was negative in 2003-2004 thanks to the proceeds coming from asset recovery and SOE privatization Notes: State Budget 2004-2009 PAN/LKPP - Audited *) State Budget (Revision) 2010 **) State Budget 2011 11

18 Realization of Government Securities Issuance 2010 (as of Dec, 31th 2010) Notes : - Assumption for exchange rate on issuance plan 2010 refers to APBN IDR 9,200/USD - Exchange rate of January 20, 2010 applies to the realization of International GDS IDR 9.275/USD 12 *) The Government plans to reduce the release of SBN, Rp. 15 5 trillion. According to this plan, the actual issuance of SBN 98.38% of target

19 13 Program Loans, 2006-2010

20 14 Notes: *) State Budget (Revision) 2010 Foreign Loans Financing, 2001-2011

21 15 Project & Program Loans Drawing, 2006-2010 as of Dec 31th, 2010

22 Notes : Preliminary figures used SAPSK 2010 source from Dit. SP DJA as of March 23, 2010 Project Loan Drawing, 2010 as of Dec 31th

23 17 Project Loan Drawing, 2010 as of Dec 31th [ Billion IDR ] [ % ]

24 Chapter 3 Debt Portfolio – Outstanding, Debt Maturity Profile, Government Securities Development and Foreign Loans

25 Notes: + very preliminary figure, as of Nov 30, 2010 * Includes semi commercial ** Some figures are semi commercial *** Includes commercial Government Debt Outstanding, 2001-2010 18

26 Trend of Government Debt Outstanding, 1998-2010 Notes: + very preliminary figure, as of Nov 30, 2010 Government securities issuance more importantly in domestic market is aimed to refinance maturing debt, balance foreign loan and strengthen domestic financial market In most of the cases, outstanding of foreign loan increases when there is domestic exchange rate depreciation 19

27 20 Debt Maturity Profile as of 2010 Govt. obligation issued for bank recap (BI/SRBI-001)

28 Government Securities Outstanding, December 2007 – Nov 30th, 2010 21

29 22 Foreign Loans by Creditor Types, 1998-2010 *) Notes: *) Including outstanding of other bilateral & multilateral donors **) Government securities excluded

30 23 Foreign Loans by Creditor Types, 2000-2010 Notes: *) as of Dec 31th, 2010 Multilateral donor (WB and ABD) and Japan has been acting in providing soft loan with long maturity and low cost

31 24 Foreign Loans by Sector, 2005-2010 Notes : -As of December 31th, 2010 -Economic Sector Grouping is based on the standard used by Bank Indonesia and Central Bureau of Statistics Source : MoF & BI

32 25 Notes : As of December 31th, 2010 Foreign Loans by Sector, 2005-2010 (chart) Source : MoF & BI

33 26 Government Debt by Currency, 2001-2010 Notes: Nominal on billion*) Nominal IDR on Trilion Rupiah, **) Nominal on billion, ***) as of dec 31th,2010

34 Notes: *) as of Dec 31th, 2010 Government Debt by Currency, 2000-2010 On average, the proportion of debt in the amount between 2000 to 2010 more than 50%, although in 2008 decreased slightly due to exchange rate depreciation due to the global financial crisis 27

35 28 Foreign Loans Drawing by Financing Type, 2006-2011 Notes : *) LKPP/PAN Realization figures **) APBN-P 2010 figures [ Trillion IDR][ % ]

36 Chapter 4 Debt Management’s Performance – Debt Performance Measurement and Comparison, Loan Disbursement, Government Debt Securities Re- profiling

37 Debt to GDP Ratio, 1998-2010 Source : MoF & BI, reprocessed Additional debt has helped to spur more growth in the economy. As a result, debt-to-GDP ratio has significantly decreases from 57% at the end of 2007 to around 32% in 2009. The ratio in 2009 is far better than in the pre-crisis period of the late 1990s. Notes: PAN/LKPP – Audited Realization figures *) very preliminary, used APBN-P 2010 assumption. Debt Service Ratio = Interest + Amortization 29

38 30 Debt to GDP Ratio – Countries Comparison, 1999-2010 Indonesia is one of the top performers in the non investment grade peer group (Argentina, the Philippines and Turkey) and this still holds even if one compares it with advanced countries such as US, UK, Japan and Italy. Source: Economist Intelligence Unit

39 31 Debt to GDP Ratio in Various Countries, 2008-2014 Source : International Monetary Fund, “The State of Public Finances; Outlook and Medium-Term Policies After the 2008 Crisis”  Indonesia is in the list of the Emerging Market G-20 countries  Taking a look at the additional debt in developed economies, they accumulate more debt than their developing counterpart

40 [Trillion IDR] Maturity Profile of Tradable Government Securities, in the end of 2001 and Nov 30th, 2010 Notes: Government Securities/SBN consist of Government Debt Securities/SUN (2001 & 2009), and Government Islamic Securities/Sukuk (2009) Since 2002, the GoI has conducted reprofiling strategy to improve government debt securities’s maturity profile, hence reducing refinancing risk

41 Debt Switching and Buyback Buyback : startegy to stabilize market and reduce debt outstanding Debt Switching : strategy to reduce refinancing risk

42 34 Debt Swap to Reduce Debt Debt swap agreement with several donors has successfully reduced debt outstanding in the amount of EUR 149.3 million and realization in the amount of EUR 82.7 million, USD 46.2 million and realization in the amount of USD 18.8 million, AUD 75 million and realization in the amount AUD 0

43 Agreement between the Government and Bank Indonesia on August 1, 2003 on the settlement of liquidity support to banking industry (BLBI) and financial relationship between the Government and Bank Indonesia  Agreed BLBI amounting Rp 144.536.094.294.530  SU-001 Rp 80.000.000.000.000  SU-003 Rp 64.536.094.294.530  Both series reissued with new single series SRBI-01/MK/2003 Rp 144.536.094.294.530 starting 1st August 2003.  Repayment arranged under burden sharing scheme:  In the case where BI’s monetary liabilities are greater than 10%, the Government will use its surplus accrued to repay remaining principal of SRBI-01  If it is lower than 3%, the Government shall pay a charge until BI’s monetary liabilities filled up to that 3% figure.  Interest Rate of SRBI-01/MK/2003: 0,1% per annual (fixed, semi annual) Restructuring 2003 35

44  SU-002/MK/1998:  Date of issuance: October 23, 1998;  Nominal: Rp20.000.000.000.000,-  Principal is indexed to inflation, on a yearly basis.  After indexation, of 3% interest payment as made on semi-annual basis calculated from principal.  Principal amortization is in semi-annual basis starting from 1st October 2003 to 1 April 2018.  SU-004/MK/1999:  Date of issuance : May 28, 1999;  Nominal: Rp53.779.500.000.000,-  Principal is indexed to inflation, on a yearly basis.  After indexation, of 3% interest payment as made on semi-annual basis calculated from principal.  Principal amortization is in semi-annual basis starting from 1st June 2003 to 1st December 2018.  Interest arrear and indexation SU-002 & SU- 004 IDR54.862.150.308.421:  Interest arrear: Rp16.929.470.080.766  Indexed to inflation: Rp37.932.680.227.655 Restructuring 2006 Pre-restructuring  SU-002/MK/1998:  Nominal: Rp20.000.000.000.000,-  1% interest will be repaid in semi-annual basis.  Principal was amortized semi-annually, starting from 1st April 2025 (no indexation to inflation applies).  SU-004/MK/1999:  Nominal: Rp53.779.500.000.000,-  3% interest will be repaid in semi-annual basis.  Principal was amortized semi-annually, starting from 1st December 2025 (no indexation to inflation applied).  SU-007/MK/2007  Nominal: 54.862.150.308.421  Non tradable, 0.1% interest per annum  Principal was installed exponentially by a cash or tradable SUN until 2025. Post-restructuring 36

45  Based on Its report on Central Govt Expenditure dated October 16-28, 2008, Working Committee agreed among others that SU-002 and SU-004 will be restructured in 2009 with interest rate applied was 0.1% or with benchmark and terms condition of SRBI-01.  Ministry of Finance and BI agreed that interest rate of both SU-002 and SU-004 will be reduced to 0.1% from 1% and 3% respectively, starting on 1st January 2009. Restructuring 2008: Restructuring for Interest Rate of SU-002 & SU-004 Amortization of SU-007 was conducted since 2007 Amortization of SU-002 and SU-004 will be conducted in 2010 SU and SRBI Position as of Dec 31th, 2010

46 38  Undisbursed loans has lessened showing efficiency improvement of the use of the proceeds of foreign loan  Disbursement performance increases as project readiness criteria has been set up and correctly applied. In addition, project monitoring and evaluation has been installed in foreign loan management Foreign Loans Disbursement Performance, 1998 – Dec31th, 2010 Net commitment = the agreed loan amount; disbursement = disbursed of loan.

47 39 External Debt Service: Countries Comparison in 2008 and 2003-2008 Indonesia has shown a moderate level of external debt service to export ratio and was on the third rank in reducing the ratio (in 2003-2008) while Brazil and Colombia were on the first and second. Sumber: IMF

48 40 Since 2004, debt service to international reserve ratio has been continuing to decrease. This concern with liquidity improvement and ability to endure (external) shock Debt Service to International Reserve Ratio, 1999-2010 Notes: * Preliminary ** Very preliminary

49 41 Debt-to-GDP Ratio: Countries Comparison in 2008 and 2003-2010 Again, Indonesia is one of the top performers in reducing the level of debt to GDP ratio both in the group developing and developed economies Public Debt, 2010 (in percent of GDP) Public Debt, changes 2003-2010 (in percent of GDP) Source: IMF

50 42 External Debt to GDP Ratio in 2008 and 2003-2008 A moderate and manageable level of external debt to GDP ratio is also another significant achievement resulted from an effective debt management and policy Source: IMF

51 43  Debt per capita in China and India is certainly much lower than Indonesia due to their demographic factor  Brazil, a rating-investment-grade country, shows a higher debt per capita than Indonesia which is in fact a non-investment-grade country Source: Economist Intelligence Unit Debt per Capita in Various Countries, 2001-2010

52 44 Debt per capita: Countries Comparison in 2008 and 2003-2008 Indonesian debt per capita is among the lowest and it is considered to fluctuate insignificantly Public Debt per Capita, 2010 (in US$) Public Debt per Capita, changes 2003-2010 (in US$) Source: IMF

53 45 Debt to Revenue Ratio: Countries Comparison in 2008 and 2003-2008 Debt to revenue ratio in Indonesia has been stabilized to a moderate level and recorded the fastest decrease Source: IMF

54 46 Interest Payment to GDP Ratio in Various Countries, 1998-2007 Interest payment to GDP ratio of Indonesia is better than countries like Turkey and The Philippines and rating-investment-grade countries such as Brazil and Italy. Source: Economist Intelligence Unit

55 Chapter 5 Costs of Borrowing – Cost of Fund, Yield Curve, External Debt’s Costs

56 47 Interest To Revenue and Expense Ratio, 2000-2010 Cost of fund is continuing to be more efficient Notes: Realization figures 2000-2008 based on APBN 2000-2008 PAN/LKPP-Audited * projection figures based on APBN (revision) 2010

57 48 Interest to Total Debt 2001-2011 Notes: Realization figures 2000-2008 based on APBN 2000-2008 PAN/LKPP-Audited * projection figures based on APBN (revision) 2010 ** projection figures based on APBN 2011

58 49 Interest Payment To Revenue Ratio In Selected Countries, In 2008 and 2003-2008 Source: IMF Interest payment to revenue ratio of Indonesia is on moderate level while Turkey and the Philippines have in a significant way brought down the ratio even further

59 50 Interest Payment Realization 2002-2010 Notes: *) figures based on APBN (revision) 2010

60 51 Program Loans: Cost Structure Notes: As of Nov 30, 2010 * ADB loans normally impose commitment fee while World Bank requires so called front-end fee ** Loan proceeds not to directly finance the climate change project

61 Yield Curve of Domestic Government Securities Declining cost of fund of Domestic Government Securities reflects increasing market confidence as a response of prudent fiscal policy and debt management [Procentage]

62 Yield Curve of Indonesian Global Bond [Procentage]

63 Chapter 6 Performance of Secondary Market for Govt. Securities – Trading Volume, Govt. Securities’ Ownership Structure

64 Average Daily Trading of Domestic Govt. Securities, as of Dec 31, 2010 Until 2007, the increasing trend of average daily trading showed a better market liquidity. Global financial crisis in 2008 has significantly reduced trading activities. However, the average volume remains higher than 2005’s figure when the crisis hit.

65 Government Securities Ownership - Bank and Non Bank, as of Dec 31, 2010 Notes: Non-Bank including Government institution The more diversified investor is demonstrated by the shrinkage of bank ownership and the augmentation of non-bank, foreign and retail investor Increasing offshore ownership is a sign of better market confidence

66 Domestic Government Securities Ownership (absolute) Notes: Nominal in trillion IDR Included SBSN ownership Foreign holders include banks, financial institution, etc; Others include individuals, corporates, foundations, etc. *) Include SUN repo transaction to BI, since February 8, 2008

67 Domestic Government Securities Ownership (%) Notes: Nominal in trillion IDR Included SBSN ownership Foreign holders include banks, financial institution, etc; Others include individuals, corporates, foundations, etc. *) Include SUN repo transaction to BI, since February 8, 2008

68 Offshore’s Ownership of Domestic Government Securities, Classified by Tenor Mayoritas investor asing merupakan ‘long-term investors’, dimana kepemilikan mereka atas SBN bertenor panjang (lebih dari 5 th) mencapai 67,04% per 31 Desember 2010. 67,08% 3,04% 9,93% 67,04% 4,64% 10,18% 19,95% 18,14%

69 Spread over UST-5 Years

70 Spread over UST-10 Years

71 Spread over UST-Feb 38

72 Chapter 7 Rating, Supreme Audit Agency Opinion, HIPICs and Conclusion

73 62 Indonesian Credit Rating  Rating Improvement Determinants  The Indonesian economy resilience in the face of global crisis in 2007- 2008  Political stability and law enforcement improvement  Prudential government debt management:  Decrease of debt to GDP ratio  Timeliness of debt obligations payment  Increasing investors / lenders confidence  Sovereign Credit Rating (Fitch, Moody’s, S&P)  Improvement rating one notch down the potential performance yield of new foreign currency of government securities approximately 75-115bps  Country Risk Classification (CRC)  Credit risk measurement of a country by OECD member countries  Range 0-7 (high risk)  Decrease 1 level CRC potentially reduce the cost of foreign loans, especially new export credit facility of about 130-150bps

74 63 Indonesia Rating Profile 1999 - 2010 show encouraging progress Indonesian Credit Rating Development (1) S&P: 2 notch goes to investment grade Fitch: 1 notch goes to investment grade Moody’s: 2 notch goes to investment grade R & I : 1 notch goes to investment grade JCRA : investment grade already

75 Indonesian Credit Rating Development (2)  Selective default was experienced by the economy in 2001 and 2003  Rating has significantly upgraded after 2004 Investment grade Moodys’s menaikan rating ke Ba2 per 16 September 2009 S&P’s menaikan rating ke BB per 12 Maret 2010 Fitch’s menaikan rating ke BB + per 25 Januari 2010 Rekapitalisasi Perbankan Krisis ekonomi 1998 Reprofiling VR & HB, Asset-Bond Swap, & penerbitan SUN jk panjang Lelang penerbitan SUN secara reguler, program Buyback Lelang penerbitan SUN secara reguler, program Buyback, & Debt Swtiching Lelang penerbitan SUN secara reguler, program Buyback, Debt Swtiching, & diversivikasi instrumen Investment grade Non Investment grade S&P sempat menurunkan rating ke Selective Default namun direvisi kembali 2 hari kemudian Non Investment grade 64

76 Indonesian Sovereign Rating – Performance Upgrading (1)  Moody’s on 16 Sept. 2009 upgraded credit rating of Indonesia from Ba3 to Ba2, with highlights as the following:  “The upgade was prompted by the Indonesian economy’s relatively strong resilience to the global recession as well as its healthy medium-term growth prospects”  “The upgrade was also prompted by an improving credit profile derived from Indonesia’s ongoing policy prudence, structural reforms, and appropriate debt management”  On 25 January 2010, Fitch’s upgraded credit rating of Indonesia from BB to BB+ with outlook stable, highlights as the following:  “The rating action reflects Indonesia's relative resilience to the severe global financial stress test of 2008 - 2009 which has been underpinned by continued improvements in the country's public finances, a fundamental sovereign rating strength, and a material easing of external financing constraint. ”  On 12 March 2010, S&P upgraded credit rating of Indonesia from BB- to BB with outlook positive, highlights as the following:  "The positive outlook reflects Standard & Poor's expectation that the political pressures experienced by the administration will prove to be only a temporary distraction from implementing its fiscal, administrative, and structural reform agenda,"  On 2 April 2010, CRC upgraded credit rating of Indonesia from clasification 5 to clasification 4, with highlights as the following:  “The main factor supporting the upgrades is Indonesian impressive macroeconomic indicators as the economy is one of the most resilient amid the global financial crises and Indonesia is one of the few countries that experienced positive economic growth in 2009. Improvement in macroeconomic performance and economic stability is the result of a combination of good and forward looking economic policy, ongoing structural reforms, as well as good debt management” 65

77 66  On 13 July 2010 JCRA upgraded credit rating of Indonesia into Investment Grade from BB+ to BBB-, with highlights as the following:  “JCR explained that the upgrade reflects (i) enhanced political and social stability along with the progress in democratization and decentralization, (ii) sustainable economic growth outlook underpinned by solid domestic demand, (iii) alleviated public debt burden as a result of prudent fiscal management, (iv) reinforced resilience to external shocks stemming from the foreign reserves accumulation and an improved capacity for external debt management and (v) efforts made by the second Yudhoyono administration to outline the framework to deal with structural issues such as infrastructure development.”  On 14 October 2010, R & I changed Indonesia outlook from stable to positive with a rating of BB, highlights as the following:  “The outlook revision and rating affirmation reflects that Indonesia is considered successful in maintaining high growth despite the global financial turmoil. R&I believes an upgrade to the ‘investment grade’ or BBB rating category is possible once Indonesia is set to sustain balanced economic growth by boosting investment in infrastructure.” Indonesian Sovereign Rating – Performance Upgrading (2)

78 67 Supreme Audit Agency Opinion on Government’s Financial Report 2009  Indonesian Supreme Audit Agency (BPK) opines unqualified (Wajar Tanpa Pengecualian/WTP) to the Financial Report of all accounts related to debt management and administration  Debt management’s accountability continues to improve  Internal control system  Compliance to the existing regulation

79  For HIPCs, debt-to-GDP ratio has declined quite significantly from 102% in 1999 to 31% in 2007  Debt write off made debt outstanding to drop off at the level of 90% in average (as on 2007) 68 GDP per capita of HIPICs and Debt-Relief Countries Countries 20002001200220032004200520062007 Year Notes: GDP Per Capita of Indonesia 2008 = USD2.246 (source: IMF) ( USD )

80 69 Conclusion  Fiscal deficit requires financing. Debt has long been recognized as the best policy tool to support liquidity and to refinance matured debt  Debt outstanding accounts growth in nominal term but debt as a share of GDP keeps to record a significant decrease and, as our fiscal rule mandates, it is still in a healthy level  Ultimate goal of debt management is to acquire fund with low cost & risk, with long term maturity, untied to any political agenda  Continuing to achieve sound fiscal policy and debt management:  Looking at another developing and even advanced countries’ performance, debt indicator of Indonesia stays better and is continuing to be so  Rules and regulations are already installed in place to guarantee accountability and transparency of debt management  Central Government’s Financial Report 2009 has been judged as unqualified (Wajar Tanpa Pengecualian/WTP) by the State Audit Board (BPK)  Improvement ratings, especially since 2005, and last (12 March 2010) increased by S & P rated BB- to BB even though in the midst of a global crisis that is still felt in some countries. While Indonesia has been included in the investment grade category by JCRA

81 © 2010 Directorate Evaluation, Accounting and Settlement Directorate General of Debt Management Ministry of Finance of The Republic of Indonesia Jl. Lapangan Banteng Timur 2-4 Jakarta Tlp: 021-3449230 psw. 5647, 021-3864778 Fax: 021-3843712 www.dmo.or.id


Download ppt "January 2011 Edition. Table of Contents Chapter 1 Background, Debt Policy & Management and its Objectives, Debt Instruments, Legal Basis 1. Background."

Similar presentations


Ads by Google