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Good Debt Management Ensures Region's Stability
Source: btimes.com.my
Source Date: Monday, March 25, 2013
Focus: Institution and HR Management
Created: Mar 26, 2013

EMERGING economies in Asia could benefit from good public debt management and development of local bond markets, which would in turn support economic stability, according to a regional debt conference.

The Ministry of Finance co-hosted the Third Asian Regional Public Debt Management Forum with the Asian Development Bank (ADB) last Wednesday.

"Countries' experience supports the conclusion that the right composition and structure of sovereign debt can provide a cushion against the financial risk stemming from a global shock," Finance Minister Agus Martowardojo said in a speech.

"A deep domestic government securities market, combined with the option to access financing from international markets and institutions, ensures funding for fiscal needs and the ability to support the domestic economy," Agus said.

Indonesia's economy survived a global financial crisis in 2008 to 2009 thanks to prudent debt management.

More than half of the country's debt issuance was in rupiah-denominated bonds, as the country was trying to avoid the resurgence of a foreign exchange situation similar to the 1998 monetary crisis.

Indonesia's debt to gross domestic product ratio has fallen in the past nine years, from 56.6 per cent in 2004 to 23.1 per cent at the end of last year.

"The government has been deepening the market by issuing diversified instruments for local investors," said David Sumual, the chief economist at Bank Central Asia.

The ADB has been involved in developing local currency bonds markets in Asia, including supporting the Asian Bond Markets Initiative, the lender said.

The ABMI began in Manila in 2003 with 10 Southeast Asian countries and Japan, China and South Korea aiming to make a more liquid bond market in the region.

As of the end of 2012, the nine countries of emerging East Asia alone had US$6.5 trillion (RM20.22 trillion) in outstanding local currency bonds, with Indonesia's market totalling US$111 billion.

Public debt management has also improved, with governments increasingly able to raise long-dated debt, making refinancing both easier and less costly, according to the development bank.

Southeast Asia is moving towards increased economic integration by 2015, despite economic recoveries in the US, Europe and Japan remaining slippery, said Thierry de Longuemar, ADB's vice-president for finance and administration.

Indonesia has sold rupiah- and dollar-denominated bonds since 2002 to plug its budget deficit.

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