UPDATE 1-Indonesia to use foreign currency bonds less this year

Mon Jan 21, 2013 9:48am EST

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* Indonesia to use foreign currency bonds less, cites exchange rate risks

* No yen bond issuance seen in 2013, plans dollar global bonds

* Issuance seen balanced across the year (Add details)

By Rieka Rahadiana and Adriana Nina Kusuma

JAKARTA, Jan 21 (Reuters) - Indonesia expects foreign currency bonds to make up a smaller proportion of its overall issuance this year, reflecting a sharp weakening in the country's rupiah currency, the head of its debt office said on Monday.

Robert Pakpahan, Director General of Debt Management, told Reuters the proportion of bonds issued in foreign currencies would drop to 14.5 percent in 2013 from 20 percent last year, and that Indonesia would not borrow in yen this year. It does intend to sell two dollar-denominated global bonds.

"We're trying to reduce a little bit our exposure to exchange rate risks," Pakpahan said in a interview, adding: "In 2013, I don't plan to take any yen because Samurai bonds require a JBIC guarantee and the last guarantee was in 2012."

Indonesia requires a guarantee from the Japan Bank for International Cooperation (JBIC) to issue yen bonds.

The Japanese currency also remains strong compared to the rupiah despite tumbling against major forex crosses, which Pakpahan said was a major factor in the decision to withdraw from the Samurai market.

Indonesia remains comfortable with foreign investors holding around a third of its relatively high-yielding government bonds, Pakpahan said.

"The only concern is the current account (deficit) ... and exchange rate. (But) looking at the ample (global) liquidity and strong (domestic economic) growth, we are still fine."

The government and central bank last week instructed state-controlled oil and gas firm PT Pertamina to stop buying dollars on the open market to ease pressure on the rupiah.

One of last year's worst performing currencies, the rupiah has fallen 0.31 percent so far this year as investors worry about Indonesia's widening current account deficit.

The G20 economy plans to hold a roadshow in March for its planned sales of two global bonds in dollars, to be issued in the first and second halves of the year.

It also plans to sell its first dollar-denominated domestic bonds in the second half of 2013, probably in a size of less than $1 billion, reflecting estimated demand, Pakpahan said.

Indonesia will issue its first retail-targeted sharia bonds on February 8, he said.

Bond issuance will be split more or less evenly between the first and second halves of the year, he said.

Indonesia is targeting a 2013 budget deficit of 1.65 percent of economic output, slightly lower than 1.77 percent this year, but has already said the deficit could widen, largely because of the cost of fuel subsidies.

(Reporting by Rieka Rahadiana, Adriana Nina Kusuma and Jonathan Thatcher; Editing by Catherine Evans)

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