The government plans to sell for the first time "retail treasury bonds" to individual investors, as part of its efforts to develop and tap into the local capital market for financing the state budget.

"We expect the retail bonds can be realized within this year's first semester. We are currently working hard to prepare it," Minister of Finance Sri Mulyani Indrawati said in a discussion on Wednesday with representatives from capital market associations, fund managers, securities firms and investment banks.

She did not elaborate on how much of the local currency bonds the government would initially issue.

The bonds are however planned to be offered in denominations that will be affordable to small investors, as compared to the government's previous treasury bonds, which are usually offered to institutional buyers such as investment banks, pension fund managers and insurance companies.

For this, Sri Mulyani said the government must, however, first put in place better market infrastructure, particularly the establishment of primary dealers and a secondary market for the bonds, as well as their price discovery, or determining the right range of prices for the bonds.

Sri Mulyani added that some members of the Association of Treasury Bond Dealers (Himdasun), who mostly have good access to advanced information on the government's existing bonds, are among the candidates for the retail bonds' primary dealers. The Surabaya Stock Exchange, meanwhile, is planning to manage the trading of the bonds.

Meanwhile, Capital Market Supervisory Agency head Darmin Nasution, said that his agency planned to wrap up the price discovery of the retail bonds within this year's first quarter.

The finance ministry's Director General of the Treasury Mulia P. Nasution had earlier mentioned the government's intention to develop the local bond market, targeting individual investors interested in investing funds of between Rp 20 million (some US$2,000) and Rp 50 million in instruments other than bank time deposits or stocks.

"We indeed see a large potential in surplus public savings that is just sitting there, as there is currently a limited number of investment instruments for the public," Sri Mulyani said.

She also explained that the plan to offer the retail bonds is part of the government's efforts to ensure more sustainable financing for the budget by tapping into the local bond market, rather than through riskier, external financing.

The government has earmarked the issuance of a total of Rp 24.8 trillion in bonds this year to help finance the budget deficit, up from Rp 22.5 trillion it issued last year. It is meanwhile, seeking Rp 35.1 trillion from external financing of program and project loans.

The government is targeting a budget deficit of Rp 22.4 trillion, or 0.7 percent of the gross domestic product (GDP). Sri Mulyani, however, said that the deficit may rise to between 0.9 and 1.1 percent due to the government's extra spending this year to boost the economy.

In addition to the retail bonds, the government also plans to issue this year its first shariah-based sukuk bonds and another batch of global bonds.