Do you want to receive our publication regularly? Subscribe here



Do you have a testimonial about us?
Write here or view here

Indonesia should reduce their exposure to foreign holdings of bonds denominated in dollars in order to reduce the pressure on the rupiah weakened, said Finance Minister Bambang Brodjonegoro on Friday.

Government bonds in the past year became the target of global investors chasing higher yields. Currently, foreign investors hold 38% of the total bonds denominated in dollars that are available today. In a meeting of finance ministers of Southeast Asia in Malaysia, Bambang said the government hoped reduce this ratio to 30%.

In a report last month, McKinsey & Co. said Indonesia, Hungary, Peru, and Turkey has a ratio of foreign holdings of debt securities denominated in local high. The four were also exposed to the risk of sudden capital outflows and currency depreciation if the United States (US) to raise short-term interest rates this year.

The rupiah dropped 13% against the dollar in the last year, partly due to the widening of the trade deficit. Indonesia relies on the export of commodities such as palm oil and coal down the middle value.

Rupiah increasingly desperate after foreign investors began to cut savings rupiah-denominated bonds in recent weeks. They are worried about the instability of dollars more and anticipating a rise in US interest rates.

The weakening rupiah helped boost exports. However, Bambang said he worried too weak currency would prejudice the manufacturing sector. Some companies in Indonesia complain downfall of dollars making the cost of imported goods production skyrocketed.

To reduce its dependence on foreign capital, the minister said Indonesia will focus on bilateral and multilateral loans as a source of future funding needs.

Source: Wallstreet Journal Jakarta dated 20 March 2015