Indonesia Raises Billions In Bonds To Fund Budget Shortfall As Christians Pray For Stability

By Stefan J. Bos, Worthy News Chief International Correspondent

JAKARTA (Worthy News) – Indonesia tried to raise money on international financial markets Wednesday amid concerns over fiscal pressures in Southeast Asia’s largest economy, which recently faced one of its sharpest stock market downturns in decades.

The government returned to global investors by selling bonds overseas — essentially borrowing money from international buyers who receive fixed interest payments in return.

Indonesia priced 9.25 billion yuan (about $1.3 billion) in offshore yuan bonds and also issued 2.7 billion euros (about $3.2 billion) in euro-denominated notes, according to people familiar with the transaction. The euro bonds reportedly attracted roughly 9.2 billion euros in orders, suggesting solid demand despite market unease.

Governments often turn to international bond markets to finance budget deficits or support development projects. However, if investors fear rising debt or weakening fiscal discipline, they may demand higher interest rates — making borrowing more expensive. Analysts warn that sustained fiscal uncertainty could further raise financing costs and pressure the rupiah.

CREDIT OUTLOOK AND MARKET PRESSURE

Concerns intensified after Indonesia posted a rare January budget shortfall following accelerated public spending to support growth.

Moody’s Ratings recently lowered Indonesia’s credit outlook to negative, signaling increased risk of a future downgrade if fiscal pressures continue. While a negative outlook does not immediately change a country’s rating, it can unsettle investors and raise borrowing costs.

The shift followed volatility in Indonesian equities after warnings from global index provider MSCI that the nation’s stock market classification could face review — a move that can influence large institutional investment flows.

When investor confidence weakens, global funds often move toward safer assets such as U.S. Treasury bonds or gold — a trend known as a “flight to safety” — which can pressure emerging-market currencies and stocks.

ECONOMIC TEST FOR PRESIDENT PRABOWO

The bond sale comes under the leadership of President Prabowo Subianto, a former army general who took office in October 2024 after winning the national election. He previously served as Indonesia’s defense minister and commanded elite military units during his army career, which ended in 1998 after he was discharged following allegations of human rights abuses during political unrest at the fall of President Suharto — allegations he has denied.

Prabowo has pledged to accelerate economic growth and expand social programs, including large-scale free school meal initiatives and rural development spending. Supporters say such policies aim to strengthen domestic demand and reduce inequality.

However, critics warn that ambitious spending plans could strain public finances if revenue growth does not keep pace. Economists have also pointed to regulatory uncertainty and slower-than-expected investment flows as ongoing challenges for Indonesia, the region’s leading economy, Bloomberg News reported.

Indonesia has sought to diversify its funding sources, including issuing so-called “dim sum bonds,” yuan-denominated bonds sold outside mainland China. Such issuance reflects broader shifts in global finance as governments explore alternatives to U.S. dollar borrowing.

LOCAL VOICES WATCH MARKETS

Despite market turbulence, some Indonesians remain cautiously hopeful. “We are closely watching the stock markets as we hope and pray for better times,” said Victoria, a Christian entrepreneur who asked to be identified by that name only for security reasons.

She uses part of her profits to support needy Christians and pastors in the world’s most populous Muslim-majority nation of about 280 million people. Christians, who comprise roughly 10 to 11 percent of the population, include traders and other leading professionals.

The strong order book for Indonesia’s latest bond offering suggests that global investors have not entirely turned away.

Still, analysts say sustained fiscal discipline and policy clarity will be crucial as President Prabowo seeks to reassure markets and deliver on his economic promises.

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