TEMPO.CO, Jakarta - Finance Minister Bambang Brodjonegoro said that Indonesia could imitate Japan's scheme in financing its debt, which is by relying on domestic investors. That way, the minister said, the state will be less susceptible to external shocks.
"Japan's foreign debt is only nine percent. The remaining 91 percent is owed to local investors. Meanwhile, 38 percent of our state bond (SUN) market is controlled by foreign investors. This is considered a risk. One day, we would want our financing model to be like Japan's, which is from our own people," Bambang said in Jakarta Monday, September 21.
The minister said there is no problem to have debts, as long as the state borrows from Indonesian investors through state bonds and retail sukuk issuances.
"That way, the source of funds (to cover deficits) will be ideal; coming from taxes and domestic bonds," he said.
To that end, the Indonesian government is mulling to expand its domestic investors' base in government bond holdings. The goal is to curb debt risks from increasing and to deepen the burden of the financial services sector.
However, domestic investors are reacting rather conservatively for financial services products. That's why the government will try to reduce investors' fear to be more involved in financing the state's budget through government bonds.
"Surely this cannot be forced and we must also provide the instruments. Gradually, we will increase the size of retail bonds, but this cannot be done drastically and suddenly, as investors' risk appetite is still conservative, with a limited liquidity," said Bambang.