JAKARTA, Aug 23 — Indonesia, rattled by a global emerging market selloff, wants to halve the foreign ownership of its sovereign bonds in five years as the government seeks to shield its assets from external shocks.

The Finance Ministry is seeking to bring down the amount of government bonds owned by offshore funds to 20 per cent from almost 38 per cent, Scenaider Siahaan, director of debt portfolio and strategy at the ministry, said by phone on Tuesday. With foreign investors still jittery about putting their money into emerging markets, the government considers it as an ideal time to widen domestic ownership, he said.

Indonesia has been one of the hardest-hit Asian emerging markets because of its reliance on foreign inflows to finance its current-account and budget deficits. Offshore ownership of its bonds peaked at just under 42 per cent in January before a selloff triggered by rising US interest rates and a stronger dollar. Overseas investors held 845.8 trillion rupiah (US$58 billion, RM240 billion) of Indonesian bonds as of Aug 20, according to Finance Ministry data.

The rupiah has weakened more than 7 per cent against the dollar this year, forcing Bank Indonesia to hike interest rate four times since mid-May and step up intervention in the foreign-exchange market. That’s also spurred President Joko Widodo to order ministers to take long-term measures to tackle the current-account deficit.

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“The finance minister wants to slash foreign ownership by half so that it will only reach around 20 per cent within the next five years,” Siahaan said. “But we need to work hard to realize that because our market has yet to be deep enough. We need to deepen it first.”

For new bond issuance next year, the government plans to keep about 70 per cent to 75 per cent in local currency debt, Siahaan said. The earliest Indonesia can switch to only rupiah-denominated bonds will be 2023, he said. — Bloomberg