Photo for illustrative purposes only. Downtown Jakarta.

Islamic Finance

Indonesia to sell bigger global sukuk in first half of 2021

JAKARTA – Indonesia’s government plans to issue a wakalah global sukuk in the first half of this year that will be bigger than last year's, Dwi Irianti, director of Islamic finance at the ministry of finance told Salaam Gateway.

“For the global sukuk issuance, the timeline is in the first half of 2021. It is flexible, whether in the first quarter or the second quarter,” said Dwi Irianti.

The sukuk will follow the $3 billion and €1 billion bonds that the sovereign issued on January 5.

The director said the structure of the upcoming global sukuk will not be significantly different from the issuance in 2020 but it would probably be a bigger sale and carry a lower profit rate.

“Given the recent development of the government need to fund the state budget, and the market volatilities, we might upsize the issuance volume compared to the past when we issued around $2.5 million to $3 million. But it will still have the same structure – three tranches of five-year tenor for green sukuk, 10-year tenor and 30-year tenor,” she said.

The sovereign sukuk in June 2020 was a $2.5 billion wakalah global paper in three tranches. The five-year paper of $750 million was sold as a green sukuk, and the other two tranches consisted of a 10-year tenor of $1 billion, and a 30-year maturity of $750 million.

The government plans to issue 1,207.3 trillion rupiah in bonds and sukuk this year to finance the 2021 fiscal deficit. This is an increase of 2.5% from last year’s 1,177.2 trillion rupiah that were issued in bonds and sukuk. 30% of this year’s issues, or around 362.2 trillion rupiah, will come from sukuk both for the global and the domestic market. The actual issuance value  will depend on how much the government needs to finance its deficit.

The government expects GDP growth of 5% this year and its budget deficit is set at 5.7% of GDP. The World Bank in its January Economic Prospects report forecasts Indonesia’s GDP growth to be 4.4% in 2021.

“For the domestic market, we will issue non-tradable sukuk twice a month at around 14 trillion rupiah each, up from the average 9.5 trillion rupiah last year,” said Dwi Irianti.

“Then there will be two tradable retail sukuk and 1 non-tradable savings sukuk (green) around 3 trillion rupiah each.”

The government also plans to sell retail cash waqf-linked sukuk. Unlike last year when the sukuk was sold offline, in 2021 it will sell the sukuk via an online platform. Dwi Irianti said the local investor base is now used to buying domestic sukuk online, and the digital channels will facilitate the sale of the government debt amid the ongoing COVID-19 pandemic.  


30%, or 362.2 trillion rupiah, will be sukuk, which will include:

  • A global wakalah sukuk of at least $2.5 billion
  • Domestic non-tradable sukuk twice a month of around 14 trillion rupiah each
  • Retail: 2 tradable retail sukuk and 1 non-tradable savings sukuk of around 3 trillion rupiah each, and a retail cash waqf-linked sukuk

Dwi Irianti believes the upcoming global wakalah sukuk will get a positive response from the market because despite the current trend of low interest rates among key markets around the world, Indonesia still offers quite an attractive yield compared to other emerging, or even developed, markets. Currently, the yield for a 10-year tenor bond is 5.9%, lower than last year at 7.1%. The market is still volatile.

Indonesia issued its first sovereign sukuk in August 2008 and continues to regularly sell the Islamic paper both at home and in the international market. The sovereign used to sell its global sukuk in the third quarter of each year but market conditions have moved its schedule.

(Reporting by Yosi Winosa; Editing by Emmy Abdul Alim

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