No sovereign borrower has been more assured than Indonesia during the coronavirus pandemic. The country gave a textbook demonstration of how to respond to a crisis — showing flexibility, maturity and a keen eye for opportunities.
The most impressive deal across Asia’s capital markets this year may still be the country’s $4.3bn multi-tranche bond in April — a time when markets were overcome with panic about the impact of the coronavirus.
The bond was a landmark for the region’s capital markets, becoming the closest we have seen to a proper Covid response bond from an Asian sovereign. Funding officials in the country did consider going the whole way, emulating some European borrowers that have
officially labelled their bonds as “Covid response” deals. But that option demanded extra time when time was in short supply. Instead, Indonesia stuck with a conventional deal but made it clear that the use of proceeds would be fighting the impact of the pandemic.
That was followed in June by a $2.5bn green sukuk, a format Indonesia has been using since 2018, when it realised combining two niche investor bases could have lasting benefits. The icing on the cake came a month later, when Indonesia sold a ¥100bn ($943m) Samurai bond.
Indonesia’s debt management team certainly had some support. A pledge from Bank Indonesia, the country’s central bank, to buy $40bn of government debt at effectively zero-percent interest rates — a move which officials stress was a one-off ‘burden sharing’ arrangement — was clearly helpful. But the
sovereign’s forays into the international markets had no such help.
Indonesia has long been seen as one of the savviest sovereign borrowers in Asia, standing alongside the Philippines, which has reduced its reliance on offshore funding in recent years, and China, which has finally woken up to the potential of the market. But a look at the country’s offshore bond supply this year should be enough to settle the debate. Indonesia is not just among the most impressive sovereign borrowers in the region; it is the very best.