The Finance Ministry of Indonesia announced that it has removed a withholding tax on interest payments on its global sovereign bonds (surat berharga negara, or SBN). Previously this tax was set at 15 percent for Indonesia-based investors and 20 percent for non-resident investors. By removing the withholding tax Indonesia's authorities aim to see its global bond yields fall by 15-20 percent. Indonesia's bond yields have been the highest in Southeast Asia. The removal of the withholding tax is effective retroactively from 1 January 2016.
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23 February 2021 (closed)
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Today's Headlines Sukuk Bonds
Indonesian credit rating agency Pefindo (Pemeringkat Efek Indonesia) says the value of issued debt paper in Indonesia may reach IDR 90 trillion (approx. USD $6.8 billion), up 34 percent from the IDR 67 trillion worth of debt paper that was issued in Indonesia last year. Debt paper involves bonds, sukuk (Islamic bonds), and medium term notes. So far this year, Pefindo has been tasked to rate up to IDR 44.1 trillion worth of debt paper, while debt paper that has been issued up to May totaled IDR 25 trillion (approx. USD $1.9 billion).
The Indonesian government is studying whether to remove the income tax on sovereign bonds (surat berharga negara, or SBN) which is currently set at 15 percent for Indonesia-based investors and 20 percent for non-resident investors. The Indonesian Finance Ministry and Financial Services Authority (OJK) will include this topic in the revision of the Income Tax Law (that is to be proposed to the House of Representatives in early 2017). Other revisions include a lower corporate income tax and a higher non-taxable income rate for individuals.
As predicted, demand for Indonesia's sharia-compliant government retail bonds (Sukuk Negara Ritel, abbreviated Sukri) remains strong and is growing. In fact, Indonesia's Finance Ministry released a statement on Monday (07/03) that said Southeast Asia's largest economy recorded its biggest ever sale of Sukri bonds. Between 19 February and 4 March 2016 Indonesia offered the three year SR-008 Islamic bond series (carrying a fixed coupon of 8.3 percent per year), raising IDR 31.5 trillion (approx. USD $2.4 billion).
Indonesia's Finance Ministry will sell rupiah-denominated Islamic bonds (known as Sukuk) on Tuesday (26/01). The ministry set an indicative target of IDR 4 trillion (approx. USD $288 million). Proceeds from the bond sale will be used to finance the government's budget deficit. This deficit is estimated to reach 2.15 percent of gross domestic product (GDP) in the 2016 State Budget.
In 2016 investors will be able to purchase about IDR 13.7 trillion (approx. USD $1.4 billion) worth of Islamic bonds (known as sukuk) to be issued by the Indonesian government. This amount is nearly double the amount of planned sharia-compliant sovereign debt paper this year (IDR 7.14 trillion). Indonesia will use proceeds from next year's bond sales to boost the nation’s infrastructure development (such as roads, ports, power plants, rail lines, bridges and Islamic universities).
Indonesia eyes to raise IDR 20 trillion (USD $1.6 billion) from the sale of sukuk, Islamic bonds, to Indonesian citizens between 23 February and 6 March 2015. These three-year Sharia-compliant retail bonds (SR-007 retail sukuk) offer an 8.25 percent coupon rate, the highest premium over existing securities in two years. The minimum order for these bonds starts at IDR 5 million and the maximum is IDR 5 billion. The Indonesian Finance Ministry said that proceeds of the debt sales will be used to finance the country’s state-budget deficit.
The Indonesian government has mandated Citigroup, HSBC and the Standard Chartered Bank to arrange the issuance of US dollar-denominated sovereign bonds in January 2015. The government also considers to issue euro-denominated bonds next year. Previously it had been reported that the Indonesian government plans to issue samurai bonds and global sukuk (Islamic bonds) in the first quarter of 2015 (as this is considered a relatively stable period) before the US Federal Reserve hikes its key interest rate.
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There is strong demand for Indonesia's sharia-compliant government retail bonds (in Indonesian: Sukuk Negara Ritel, abbreviated Sukri). Since the launch of series SR-008 on Friday (19/02), a number of sales agents have run out of quota. These financial institutions now request additional quota from the government. The three year SR-008 series carries a fixed coupon of 8.3 percent per year (and is tradable on the secondary market). The government of Indonesia targets to collect up to IDR 30 trillion (approx. USD $2.2 billion) in funds from the issuance. Sukri bonds are only available to Indonesian citizens.
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