Investor Meeting Presentation March 2013 Directorate General of - - PowerPoint PPT Presentation

Investor Meeting Presentation

March 2013

Directorate General of Debt Management Ministry of Finance of The Republic of Indonesia www.dmo.or.id

Tab able le of

• f Con
• ntent

tent

Government Debt Position Prudent Fiscal Management Preserved Macroeconomic Stability to Support Further Growth

Government Debt Position

4

Notes: + Provisional as of January 2013

Gov’t. Debt Outstanding 2007-2012

[IDR Trillion and % ] Year Loan 730 45% 611 38% 617 37% 621 37% 614 31% 606 31%

• Govt. Securities

906 55% 979 62% 1.064 63% 1.188 63% 1.361 69% 1.374 69% Total 1.637 100% 1.591 100% 1.682 100% 1.809 100% 1.975 100% 1.980 100% 2013**) 2012*) 2010 2009 2011 2008

906 979 1.064 1.188 1.361 1.374 730 611 617 621 614 606

• 200

400 600 800 1.000 1.200 1.400 1.600 1.800 2.000

2008 2009 2010 2011 2012*) 2013**)

Loan

• Govt. Securities

[ IDR Trillion ]

5

• 6,31
• 9,70
• 9,70
• SUKUK IDR

• 0,25
• 1,21
• 1,55
• 2,85
• 2,18
• 4,11

• SUN JPY
• 3,64

• 6,23
• SUN USD
• 22,32

• 15,53
• 14,56

• 21,83

• 6,40

• 20,00

40,00 60,00 80,00 100,00 73 73 77 52 50 71 57 69 60 92 33 18 28 20 44 31 26 27 43 19 16 4 28 35 47 53 55 54 50 44 43 42 41 36 30 25 21 18 15 13 11 9 9 8 8 7 5 3 2 1 1 1 2

• 20

40 60 80 100 120 140 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040-2055

Loan

• Govt. Securities

[IDR Trillion]

Debt Maturity Profile

As of January 2013 As of March 4, 2013

Note: Data is not including non-tradable govt. bond [IDR Trillion]

6

Debt Risk Indicators, 2007 - 2012

26,7 22,9 22,0 20,3 18,8 16,1 30,2 28,2 28,2 26,1 25,9 22,4

2007 2008 2009 2010 2011 2012

Interest Rate Risk

Variable rate ratio [%] Refixing rate [%] 16,5 17,2 13,4 12,1 10,9 10,7 46,9 52,1 47,4 46,2 45,1 44,4

2007 2008 2009 2010 2011 2012

Exchange Rate Risk

FX Debt to GDP ratio (%) FX Debt to total debt ratio (%) 10,4 10,0 9,7 9,5 9,3 9,7

2007 2008 2009 2010 2011 2012

Average Time To Maturity (ATM)-Years

Average Time to Maturity (in percentage) 6,8 6,4 7,6 7,1 8,2 7,2 19,4 18,6 20,3 20,8 22,7 21,5 30,6 31,1 33,2 34,1 34,6 32,4

2007 2008 2009 2010 2011 2012

Debt Maturing in 1, 3 and 5 Years

Maturity debt portion < 1 year (%) Maturity debt portion < 3 year (%) Maturity debt portion < 5 year (%)

7

Financing Trend, 2006 – 2012 Budget Deficit Financing

(trillion IDR)

Notes: * Revised Budget 2012 ** Budget 2013

2006 2007 2008 2009 2010 2011 2012* 2013** Govt Securities - net 36,0 57,2 85,9 99,5 91,1 119,9 159,6 180,4 Domestic Loan

• 0,39

0,62 0,99 0,5 External Loan - net (26,6) (26,6) (18,4) (12,4) (4,57) (17,8) (4,4) (19,5) Others/Non-Debt - net 20,0 11,9 16,6 25,5 4,6 28,3 33,9 (8,1) Budget Defisit, % to GDP 0,9 1,3 0,1 1,6 0,7 1,1 2,2 1,6

0,9 1,3 0,1 1,6 0,7 1,1 2,2 1,6 (0,5)

• 0,5

1,0 1,5 2,0 2,5

• 50

50 100 150 200

8

33,1% 28,3% 26,1% 24,3% 24,0% 23,1% 0% 10% 20% 30% 40%

2008 2009 2010 2011 2012* 2013**

Debt to GDP Ratio and Debt Service Ratio 2008 – 2013

Debt to GDP Ratio (% of GDP) Debt Service to GDP Ratio (%) Interest Expenses to Revenue and Expenditure Ratio (%) Interest Expenses to Tax Revenue & Central Government Expenditure Ratio (%)

Notes: * Based on Realization of Dec 2012 (Unaudited) ** Based on Budget 2013

14,2% 15,1% 12,2% 10,7% 10,3% 9,5% 12,8% 14,9% 12,7% 10,6% 10,0% 9,8%

0% 2% 4% 6% 8% 10% 12% 14% 16%

2008 2009 2010 2011 2012* 2013**

to Tax Revenue to Central Gov't Expenditure

9,01% 11,05% 8,88% 7,70% 7,53% 7,40% 8,97% 10,00% 8,48% 7,20% 6,79% 6,73%

0% 2% 4% 6% 8% 10% 12% 2008 2009 2010 2011 2012* 2013**

Interest to Revenue Interest to Expenditure

4,0% 3,8% 3,4% 3,1% 3,0% 2,9% 0% 1% 1% 2% 2% 3% 3% 4% 4% 5% 2008 2009 2010 2011 2012* 2013**

9

Gov’t Debt Securities Issuance Plan 2013

Gov’t Debt Operation – Policy Combination

• Issuing in domestic market will be prioritized
• Issuing in variety of tenor
• Issuing in global market
• Maximum foreign issuance 14% from total gov’t

debt securities issuance

• Buyback, debt switching, direct transaction
• Initiatives strategic :USD issuance domestically &

liability management (USD bonds)

Benchmark Series for 2013

• FR 66 – 5 Y
• FR 63 – 10 Y
• FR 64 – 15 Y
• FR 65 – 20 Y

Indicative Tenor in Domestic Market

• 1 y - 13 % *
• 3 y - 10 % * ^
• 5 y - 18 % *
• 10 y - 12 % *
• 15 y - 12 % *
• > 20 y - 21 % *

* as percentage of total gross securities issuance in the domestic market ^ Retail bond

IDR (trillion) $ USD (billion) IDR (trillion) $ USD (billion)

Deficit (190,1) (19,63) (153,3) (15,83) Amortization (158,8) (16,40) (159,5) (16,47) External Loan (50) (5) (58) (6) Govt Securities (incl Buyback) (109) (11) (100,9) (10) Domestic Loan (0,14) (0,01) (0,25) (0,03) Non Debt Financing Expenditures (26,62) (2,75) (22,93) (2,37) Two Steps Loan (8,4) (0,87) (7,0) (0,72) Financing Needs (384,0) (39,6) (342,8) (35,4) Financing Sources 384,0 39,6 342,8 35,4 Non Debt (Gross) 60,6 6,25 14,8 1,53 Debt (Gross) 323,4 33,39 328,0 33,86 Govt Securities 268,5 27,7 281,3 29,0 Program Loan 15,6 1,6 6,5 0,7 Project Loan (Bruto) 38,1 3,9 39,4 4,1 Domestic Loan 1,1 0,1 0,8 0,1

Exchange Rate Assumption (IDR/USD 1) a.o March 6, 2013: 9.686 IDR

2013 - Budget 2012 - Revised Budget

10

2012-2013 Funding Strategy Progress

2012 - Revised Budget (trillion IDR) % of GDP 2013 - Budget (trillion IDR) % of GDP Total Revenue & Grants 1.358,2 15,9% 1.529,7 16,5%

• f which

Tax Revenue 1.016,2 11,9% 1.192,99 12,9% Non Tax Revenue 341,14 4,0% 332,20 3,6% Expenditure 1.548,3 18,1% 1.683,0 18,2%

• f which

Interest payment 117,8 1,4% 113,2 1,2% 0,0% 0,0% Subsidy 245,1 2,9% 317,2 3,4% 0,0% 0,0% Primary Balance (72,3)

• 0,8%

(40,1)

• 0,4%

Overall Balance (deficit) (190,1)

• 2,2%

(153,3)

• 1,7%

Financing 190,1 2,2% 153,3 1,7% Non Debt (Net) 33,9 0,4% (8,1)

• 0,1%

Debt 156,2 1,8% 161,5 1,7% 0,0% 0,0% Govt Securities (Net) 159,6 1,9% 180,4 1,9% 0,0% 0,0% Domestic Official Borrowing 1,0 0,0% 0,5 0,0% External Official Borrowing (Net) (4,4)

• 0,1%

(19,5)

• 0,2%

Disbursement 53,7 0,6% 45,9 0,5% Program Loan 15,6 0,2% 6,5 0,1% Project Loan (Bruto) 38,1 0,4% 39,4 0,4% On lending (8,4)

• 0,1%

(7,0)

• 0,1%

Repayment (49,7)

• 0,6%

(58,4)

• 0,6%

Assumptions: GDP (trillion) 8.542,6 9.269,6 Growth (%) 6,5 6,8 Inflation (%) 6,8 4,9 3-months SPN (% avg) 5,0 5,0 Rp / USD (avg) 9.000,0 9.300,0 Oil Price (USD/barrel) 105,0 100,0 Oil Lifting (MBCD) 930,0 900,0 Item (Million IDR)

Budget 2013

Realization (ao March 5, 2013)

% Realization Government Securities Maturity 2013 85.620.835 18.334.112 21,41% Government Securities Net 180.439.900 34.944.763 19,37% Buyback 3.000.000

• 0,00%

Issuance Need 2012* 280.860.735 53.278.875 18,97% Government Debt Securities (GDS) 35.000.000 Domestic GDS 35.000.000

• Coupon GDS

29.200.000

• Conventional T-Bills

5.800.000

• Retail Bonds

International Bonds

• USD Global Bonds
• Samurai Bonds

Government Islamic Debt Securities 18.278.875 Domestic Government Islamic Debt Securities 18.278.875

• IFR/PBS (Islamic Fixed Rated Bond/Proje

3.310.000

• Islamic T-Bills
• Retail Sukuk

14.968.875

• SDHI

International Sukuk *Adjusted by changes in Cash Management & Debt Switch

11

Debt Issuance Program 2013

Calendar of Issuance

11

Month Date Type Tenor (sector) 1) Target (Rp)

1) Tenor (sector) means that the tenor to be issued will be around the tenor stated in column "Tenor (sector)".

2) The total of issuance is excluding Sukuk Retail, ORI, Bonds in currencies other than Rupiah, and USD denominated bonds in Domestic market

12

Domestic Market is Arising

The amount of incoming bids for long tenor bonds from local institutional buyers in recent auctions

Others : Domestic pension funds, insurance companies and mutual funds

Increasing demand in domestic primary market align with downward trend in borrowing cost

12

24% 14% 19% 29% 35% 24% 33% 24% 35% 37% 23% 22% 52% 48% 51% 45% 45% 51% 51% 32% 41% 49% 59% 53%

24% 38% 30% 26% 20% 24% 16% 44% 24% 14% 17% 25%

Foreign Local Bank & Central Bank Others

Incoming Bid - Long Tenor (≥ 10 years)

24,60 53,98 48,73 95,57 189,46 136,18 198,23 315,91 393,41 430,59 81,64

11,92 10,42 13,97 10,14 10,01 11,86 10,04 7,57 5,96 5,30 5,30

3 6 9 12 15

• 100

200 300 400 500

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 as of Feb 28, 2013

Total Incoming Bid Total Bid Accepted Yeild at Tenor 10 year

13

Government Debt Securities Auction in 2012-2013

4 8 12 16 20 11 22 33 44 55

10-Jan-12 26-Jan-12 31-Jan-12 07-Feb-12 14-Feb-12 21-Feb-12 23-Feb-12 06-Mar-12 13-Mar-12 20-Mar-12 27-Mar-12 03-Apr-12 10-Apr-12 17-Apr-12 24-Apr-12 02-May-12 08-May-12 14-May-12 22-May-12 05-Jun-12 12-Jun-12 19-Jun-12 26-Jun-12 03-Jul-12 10-Jul-12 17-Jul-12 24-Jul-12 07-Aug-12 09-Aug-12 28-Aug-12 04-Sep-12 11-Sep-12 18-Sep-12 25-Sep-12 02-Oct-12 04-Oct-12 16-Oct-12 23-Oct-12 30-Oct-12 12-Nov-12 03-Dec-12 15-Jan-13 29-Jan-13 05-Feb-13 14-Feb-13 19-Feb-13 26-Feb-13 05-Mar-13

Incoming Bids Awarded Bids Bid to cover [RHS]

IDR Trillion

14

2,00 4,00 6,00 8,00 10,00 12,00 14,00 16,00 18,00 20,00 22,00

Apr'08 Jul'08 Okt'08 Jan'09 Apr'09 Jul'09 Okt'09 Jan'10 Apr'10 Jul'10 Okt'10 Jan'11 Apr'11 Jul'11 Okt'11 Jan'12 Apr'12 Jul'12 Okt'12 Jan'13

5Y 10Y 15Y 20Y Global Financial Crisis

Eurozone sovereign debt crisis

Secondary Market Performance of Government Bonds

Average daily trading Yield of Benchmark Series

Average daily trading significantly increased, while yield on benchmark series steadily decreased

[In Percentage]

As of March 5, 2013

14

3.307 5.899 4.235 3.420 4.963 7.671 9.389 8.259 10.912 6.971 5.767 6.566 8.794 9.711 13.324 10.458 9.907 12.074 9.927 6.657 7.603 7.684

• 80

160 240 320 400 480 560 640 720

• 2.000

4.000 6.000 8.000 10.000 12.000 14.000

2006 2007 2008 2009 2010 2011 2012 Jan '12 Feb '12 Mar '12 Apr'12 May'12 Jun'12 Jul'12 Aug'12 Sep'12 Okt'12 Nov'12 Des'12 Jan '13 Feb 2013 1 Mar 2013

Volume (billion rupiah) - LHS Frequency - RHS

15

Ownership of Tradable Government Securities

In IDR Trillion

Domestic financial institutions are picking up in size, however demand for Gov’t bonds from foreign investors keep growing above the demand from financial institutions. 15

Des-08 Banks 258,75 49,2% 254,36 43,72% 217,27 33,88% 265,03 36,63% 299,66 36,73% 309,93 36,19% 306,24 35,79% Govt Institutions 23,01 4,4% 22,50 3,87% 17,42 2,72% 7,84 1,08% 3,07 0,37% 4,60 0,54% 6,00 0,70% Non-Banks 243,93 46,4% 304,89 52,41% 406,53 63,40% 450,75 62,29% 517,53 63,09% 541,86 63,27% 543,44 63,51% Mutual Funds 33,11 6,3% 45,22 7,77% 51,16 7,98% 47,22 6,53% 43,19 5,27% 43,04 5,03% 43,06 5,03% Insurance Company 55,83 10,6% 72,58 12,48% 79,30 12,37% 93,09 12,86% 83,42 10,17% 117,44 13,71% 117,62 13,75% Foreign Holders 87,61 16,7% 108,00 18,56% 195,76 30,53% 222,86 30,80% 270,52 32,98% 281,63 32,89% 284,14 33,21% Insurance 0,03 0,0% 0,06 0,01% 1,35 0,21% 2,94 0,41% 3,59 0,44% 3,59 0,42% 3,59 0,42% Pension Fund 0,17 0,0% 1,23 0,21% 2,31 0,36% 2,76 0,38% 4,40 0,54% 4,77 0,56% 4,77 0,56% Corporate 0,69 0,1% 3,66 0,63% 5,71 0,89% 6,59 0,91% 10,78 1,31% 12,59 1,47% 13,77 1,61%

• Fin. Institutions

83,38 15,9% 78,41 13,48% 126,69 19,76% 133,63 18,47% 159,09 19,39% 162,29 18,95% 163,52 19,11% Individual 0,06 0,0% 0,06 0,01% 0,10 0,02% 0,09 0,01% 0,10 0,01% 0,09 0,01% 0,09 0,01% Mutual Fund 0,49 0,1% 21,53 3,70% 53,53 8,35% 68,30 9,44% 70,09 8,55% 74,15 8,66% 74,20 8,67% Securities 2,67 0,5% 2,65 0,45% 4,34 0,68% 4,88 0,67% 5,56 0,68% 4,93 0,58% 4,93 0,58% Foundation 0,07 0,01% 0,06 0,01% 0,07 0,01% 0,06 0,01% 0,06 0,01% Others 0,11 0,0% 0,39 0,07% 1,64 0,26% 3,60 0,50% 16,84 2,05% 19,18 2,24% 19,21 2,24% Pension Fund 32,98 6,3% 37,50 6,45% 36,75 5,73% 34,39 4,75% 56,46 6,88% 27,55 3,22% 27,48 3,21% Securities Company 0,53 0,1% 0,46 0,08% 0,13 0,02% 0,14 0,02% 0,30 0,04% 1,18 0,14% 0,76 0,09% Individual 30,29 3,54% 29,34 3,43% Others 33,87 6,4% 41,12 7,07% 43,43 6,77% 53,05 7,33% 63,64 7,76% 40,72 4,76% 41,04 4,80% Total 525,69 100% 581,75 100% 641,21 100% 723,61 100% 820,27 100% 856,39 100% 855,69 100% Dec-12 Dec-09 Dec-10 Dec-11 04-Mar-13 28-Feb-13

16

Foreign Investor Activity

Net Buyer (Seller) - Non Resident Foreign Ownership - Proportion by Tenor

Foreign investors mostly dominated by high quality long term investors

In IDR Trillion

4% 10% 12% 8% 8% 8% 5% 5% 8% 3% 3% 3%

20% 18% 17% 16% 17% 17% 22% 21% 25% 28% 27% 27% 49% 46% 38% 45% 45% 45% 19% 30,53% 30,80% 32,98% 32,89% 33,24% 0% 20% 40%

0% 20% 40% 60% 80% 100%

Dec-09 Dec-10 Dec-11 Dec-12 Feb-13 5-Mar-13

>10 >5-10 >2-5 >1-2 0-1 % Foreign Ownership to Total (RHS) 4,56 8,06 13,11 (8,99) (2,27) 4,15 (4,37) (0,08) 10,13 (1,41) 7,83 9,35 19,52 0,68 2,68 8,44 2,83

(0,06) (0,04) (0,02) 0,00 0,02 0,04 0,06 0,08 0,10 (15,00) (10,00) (5,00) 0,00 5,00 10,00 15,00 20,00 25,00

Dec-10 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 05-Mar-13

Capital Inflows Capital Inflows of Average of Foreign Holder

17

• 200

400 600 800 1.000 1.200 1.400 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12

Indonesia Phillipine Turkey 200 400 600 800 1000 1200 1400 1600

2 4 6 8 10 12 14 16

Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13

Yield - 10 y Global Bond CDS 10 y (RHS)

Global Bonds Issuance Result (10 – year) & Yield Secondary Market

Cost of 10 y global bonds is declining, along side its spread over treasury

Source : Bloomberg

36% 53% 40% 30% 24% 19% 30% 24% 29% 37% 66% 35% 29% 28% 31% 21% 29% 47% 20% 27% 22% 12% 17% 31% 35% 18% 29% 49% 47% 34% 50% 49% 49% 51% 17% 34% 0% 20% 40% 60% 80% 100%

Asia Europe USA

As of February 27, 2013

10Y CDS (as of Feb 27, 2013)

18

Government Securities Profile

• Since October 2006, Government and Central Bank committed to replace interest payment of Promissory Notes to Bank Indonesia

(SU-002 & SU-004) with new bond (SU-007) and omitted indexation of SU-002 & SU-004

GOVERNMENT DEBT SECURITIES (GDS) Dec-09 Dec-10 Dec-11 Dec-12 Feb-13 5-Mar-13

• 1. Domestic Tradable GDS

IDR 570.215 IDR 615.498 IDR 684.618 IDR 757.231 IDR 783.868 IDR 783.168

• a. Zero Coupon

IDR 33.386 IDR 32.307 IDR 32.412 IDR 24.083 IDR 21.520 IDR 20.820

• 1. Government Treasury Bills

IDR 24.700 IDR 29.795 IDR 29.900 IDR 22.820 IDR 21.520 IDR 20.820

• 2. Zero Coupon Bond

IDR 8.686 IDR 2.512 IDR 2.512 IDR 1.263 IDR - IDR -

• b. Government Domestic Bonds

IDR 536.829 IDR 583.191 IDR 652.206 IDR 733.148 IDR 762.348 IDR 762.348

• 1. Fixed Rate *) +)

IDR 393.543 IDR 440.396 IDR 517.142 IDR 610.393 IDR 639.593 IDR 639.593

• 2. Variable Rate *)

IDR 143.286 IDR 142.795 IDR 135.063 IDR 122.755 IDR 122.755 IDR 122.755

• 2. Promissory Notes to Bank Indonesia **) ***)

IDR 251.875 IDR 248.432 IDR 244.636 IDR 240.144 IDR 238.907 IDR 238.907

• 3. Total GDS (2+3)

IDR 822.090 IDR 863.930 IDR 929.254 IDR 997.376 IDR 1.022.776 IDR 1.022.076

• 4. Total Government International Bonds *)

USD 14.200 USD 16.200 USD 18.700 USD 22.950 USD 22.950 USD 22.950 35.000 ¥ 95.000 ¥ 95.000 ¥ 155.000 ¥ 155.000 ¥ 155.000 ¥

• 5. TOTAL GOV'T DEBT SECURITIES (3+(4*Exchange Rate Assumption))

IDR 959.130 IDR 1.020.062 IDR 1.109.922 IDR 1.236.658 IDR 1.260.846 IDR 1.260.888 GOVERNMENT ISLAMIC DEBT SECURITIES (GIDS)

• 6. Domestic Tradable GIDS

IDR 11.533 IDR 25.717 IDR 38.988 IDR 63.035 IDR 72.520 IDR 72.520

• a. Fixed Rate *)++)

IDR 11.533 IDR 25.717 IDR 37.668 IDR 62.840 IDR 71.625 IDR 71.625

• b. Zero Coupon

IDR 1.320 IDR 195 IDR 895 IDR 895

• 7. Domestic Non Tradable GIDS

IDR 2.686 IDR 12.783 IDR 23.783 IDR 35.783 IDR 35.783 IDR 35.783

• 8. Government International Islamic Bonds
• 1. Fixed Rate *)

USD 650 USD 650 USD 1.650 USD 2.650 USD 2.650 USD 2.650

• 9. TOTAL GOV'T DEBT SECURITIES (6+(8*Exchange Rate Assumption))

IDR 17.643 IDR 31.561 IDR 53.950 IDR 88.660 IDR 98.137 IDR 98.235

• 10. TOTAL GOVERNMENT SECURITIES

IDR 979.458 IDR 1.064.406 IDR 1.187.655 IDR 1.361.101 IDR 1.394.767 IDR 1.394.907 Notes:

• Nominal in billion rupiah (domestic bonds), million USD & million JPY (international bonds)
• *) Tradable
• **) Non-Tradable
• +) Including ORI (IDR Billion))

IDR 40.149 IDR 40.672 IDR 51.672 IDR 42.451 IDR 42.451 IDR 42.451

• ++) Including Sukuk Ritel/SR (IDR Billion)

IDR 5.556 IDR 13.590 IDR 20.931 IDR 28.989 IDR 20.955 IDR 20.955

• Exchange Rate Assumption (IDR/USD1)

IDR 9.400 IDR 8.991 IDR 9.068 IDR 9.670 IDR 9.667 IDR 9.704

• Exchange Rate Assumption (IDR/JPY1)

IDR 101,70 IDR 110,29 IDR 116,80 IDR 111,97 IDR 104,60 IDR 103,91

19

• 2.0

4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 20.0 22.0 1Y 2Y 3Y 4Y 5Y 6Y 7Y 8Y 9Y10Y 15Y 20Y 30Y

5 Mar '13 26 Feb '13 5 Feb '13 9 Feb '12 23 Sep '11 27 Oct '08 13 Sep'05 [in percentage]

Sources: IDMA, Bloomberg

Yield Curve of Government Securities (IDMA/Himdasun)

Tenor 5-Mar-13 26-Feb-13 5-Feb-13 9-Feb-12 23-Sep-11 27-Oct-08 13 Sep'05 1Y 3.69 3.74 3.88 3.30 5.29 19.37 2Y 4.13 4.14 4.28 4.21 6.01 17.35 14.59 3Y 4.28 4.27 4.43 4.33 6.13 19.93 4Y 4.51 4.51 4.61 4.39 6.54 17.17 14.14 5Y 4.76 4.73 4.71 4.44 6.69 17.46 14.96 6Y 4.85 4.81 4.86 4.79 6.81 17.05 15.24 7Y 4.95 4.91 5.01 4.88 7.08 17.06 16.17 10Y 5.33 5.26 5.24 5.02 7.43 20.91 15.75 15Y 5.98 5.95 5.92 5.47 7.83 16.65 14.12 20Y 6.24 6.24 6.23 5.96 8.20 20.27 30Y 6.38 6.35 6.42 6.17 8.29 20.37

20

Implementing Crisis Management Protocol

1

Implementing Bond Stabilization Framework

2

Enhancing coordination between government institutions and continuous dialogue with market participants

3

Pre-emptive measures

Buyback of government bonds by the DMO from the state budget Potential purchase of government bonds by State Owned Enterprises

Purchase of government bonds by the Treasury office Purchase of government bonds by the DMO from accumulated cash surplus

Specific policies in place to address crisis enacted in the 2012 budget law

4

Swap facility arrangements based on international cooperation

5

1. Indicators to determine crisis level of Government Securities Market condition (normal, aware, alert, crisis) 2. There are some indicators that are monitored:

a. Benchmark yield on Government securities b. Exchange rate c. Jakarta Composite Index (JCI) d. Foreign ownership in Government securities

3. Policies to address the crisis at every level:

a. Re-purchase Gov. securities at secondary market b. Postpone or stop the issuance of Govt. securities

Bond Stabilization Framework Crisis Management Protocol

Policies to Address and Mitigate Sudden Reversal

21

R&I – 18 October 2012 “With the global economy slowing down, Indonesia maintains relatively high economic growth. Its fiscal management remains conservative, and the government’s debt burden is kept low. The financial system has also become more stable. Greater trust in its economy has led to an increase in foreign investment, and reinforcement of the industrial bas has been progressing gradually .”

Mar-99 Nov-99 Jul-00 Feb-01 Oct-01 Jun-02 Jan-03 Sep-03 Apr-04 Dec-04 Aug-05 Mar-06 Nov-06 Jul-07 Feb-08 Oct-08 May-09 Jan-10 Sep-10 Apr-11 Dec-11

Moody's S&P Fitch

Indonesia’s credit ratings

Solid economic fundamentals have been supporting the improvement of Indonesia’s sovereign credit ratings since 2001

Rating agencies comments

International rating agencies are recognising the improvements in the Indonesian economy

B3/B-/B- B2/B/B B1/B+/B+ Ba3/BB-/BB- Ba2/BB/BB Ba1/BB+/BB+ Baa3/BBB-/BBB-

Investment grade

Rating history

CCC+/CCC+/Caa1 CCC/CCC/Caa2 Positive outlook Negative outlook Stable outlook Positive Watch Source: Moody’s, Fitch, S&P Moody’s – 18 January 2012 “Indonesia‘s cyclical resilience to large external shocks points to sustainably high trend growth…Economic strength is underpinned by gains in investment spending, improved prospects for infrastructure development following key policy reforms, and a well-managed financial system.”

Baa3 / Stable

Fitch – 15 December 2011 “The rationale behind the upgrade is improved economic performance, strengthened external liquidity, low and declining public debt ratios, and a prudent overall macro policy framework. Rapid progress in tackling structural weaknesses combined with sustained economic growth in line with or better than Fitch’s projections without a build-up of external imbalances or a severe inflation shock would enhance Indonesia’s economic and sovereign credit fundamentals and exert upward pressure on the rating.”

BBB- / Stable

JCR – 24 August 2011 “The ratings reflect (i) the country’s sustainable economic growth outlook underpinned by solid domestic demand, (ii) alleviated public debt burden brought by prudent fiscal management, (iii) reinforced resilience to external shocks stemming from accumulated foreign exchange reserves and an improved external debt management capacity.…”

BBB- / Stable BBB- / Stable

Prudent Fiscal Management

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2012 Budget Highlights – 2013 Budget Preview

Revised 2012 and proposed 2013 state budget

Manageable 2012 budget deficit of US$21.1 billion or 2.23% of GDP, 1.65% of GDP in 2013

2013 GDP growth forecast by expenditure Private consumption: 4.9% Public consumption: 6.7% Investment: 11.9% Sectoral growth targets for 2013 Manufacturing industry: 6.5% Agriculture, livestock, forestry and fisheries: 3.7% Trade, hotels and restaurants: 8.9% Mining and quarrying: 2.8% Development targets for 2013 Open unemployment rate: 5.8% – 6.1% People living below poverty line: 9.5%– 10.5%

Source: Ministry of Finance Note: IDR/US. exchange rate of 9,000 (for revised budget 2012) and 9,300 (for proposed budget 2013), US dollar values are for convenience only.

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2012-2013 State Budget Summary

2013 Revised Budget (APBNP) Realization (unaudited) Percentage State Budget (APBN)

• A. Total Revenues and Grants

1,358.2 1,335.7 98.3% 1,529.7

• I. Domestic Revenue

1,357.4 1,331.7 98.1% 1,525.2 1 Tax Revenue 1,016.2 980.1 96.4% 1,193.0 Domestic Taxes 968.3 930.5 96.1% 1,134.3 i. Income Tax 513.7 464.7 90.5% 584.9

• ii. Value Added Tax

336.1 337.6 100.5% 423.7 2 Non Tax Revenue 341.1 351.6 103.1% 332.2 Natural Resources 217.2 226.5 104.3% 197.2 i. Oil and Gas 198.3 205.8 103.8% 174.9

• ii. Non Oil and Gas

18.8 20.6 109.3% 22.3

• II. Grants

0.8 4.0 484.8% 4.5

• B. Expenditures

1,548.3 1,481.7 95.7% 1,683.0 I Central Government Expenditures 1,069.5 1,001.3 93.6% 1,154.4 1 Personnel Expenditure 212.3 197.7 93.1% 241.1 2 Material Expenditure 162.0 129.8 80.1% 167.0 3 Capital Expenditure 176.1 139.7 79.3% 216.1 4 Interest Payments 117.8 100.5 85.3% 113.2 5 Subsidy 245.1 346.4 141.3% 317.2 a. Energy Subsidy 202.4 306.5 151.5% 274.7 b. Non Energy Subsidy 42.7 39.9 93.4% 42.5 6 Grants 1.8 0.1 5.6% 3.6 7 Social Assistance 86.0 75.3 87.6% 63.4 8 Other Expenditure 68.5 3.9 5.7% 20.0

• II. Transfer to Region

478.8 480.4 100.3% 528.6

• C. Primary Balance

(72.3) (45.5) 62.9% (40.1)

• D. Surplus/(Deficit)

(190.1) (146.0) 76.8% (153.3) % Deficit to GDP (2.23) (1.77) 79.4% (1.65) E. 190.1 180.0 94.7% 153.3

• I. Domestic Financing

194.5 199.2 102.4% 172.8

• II. Foreign Financing

(4.4) (19.1) 431.6% (19.5) SURPLUS/(DEFICIT) FINANCING 0.0 34.0

• 2012

Item Financing

Preserved Macroeconomic Stability to Support Further Growth

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The Inflation Remains Under Control

Inflation – by component

Source: Bank Indonesia

7.48% 4.32% 2.42% 4.57%

• Inflation in January 2013 remained subdued and arrive at target range of 4.5%±1%, that is 4.57%(yoy), 1.03% (ytd) and

1.03% (mtm).

• In addition to low inflation in volatile food and administered prices, core inflation was also contained driven by the

implementation of monetary and macro prudential policy mix directed toward managing the inflation pressures from the demand side, imported inflation as well as inflation expectation. And also strengthen policy coordination with the Government through national inflation control team (TPI) and regional inflation control team (TPID).

• Going forward, inflation will remain contained within its target range of 4.5%±1% in 2013 and 2014.

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Source: Bank Indonesia

Balance of Payments Q4/2012

Balance of Payments

The balance of payments surplus increased from US$0.8 billion to US$3.2 billion in Q4/2012, primarily due to significant increase in the capital and financial account surplus amidst a downward pressure in the current account. Accordingly, international reserves at the end of December 2012 strengthened to US$112.8 billion, equivalent to 6.1 months of imports and servicing of official external debt.

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Exchange Rate

Rupiah Exchange Rate Quarterly Appre/Depr.

Source: Bank Indonesia.

• On January 2013, Rupiah depreciated by 0.22% (mtm) to Rp9.654 per USD, with a contained

volatility.

• In the future, Bank Indonesia will continue to maintain the stability of Rupiah exchange rate

consistent with its economic fundamentals. Furthermore, Bank Indonesia will support the formation of a reference to Rupiah exchange rate in the domestic spot market. This reference is expected to promote foreign exchange market efficiency, deepening the domestic financial market.

Th Thank ank You You

Directorate General of Debt Management Ministry of Finance of The Republic of Indonesia www.dmo.or.id