JAKARTA: Indonesia’s sovereign wealth fund yesterday signed two agreements to invest in toll roads on the islands of Sumatra and Java worth more than 39 trillion rupiah (US$2.72bil or RM11.4bil), president Joko Widodo said.

       The Indonesia Investment Authority (INA) signed a heads of agreement with state construction firm Hutama Karya to invest in three parts of the Trans Sumatra toll road, said finance minister Sri Mulyani Indrawati, who also attended the signing ceremony in Jakarta.

       INA also signed a confirmation on the start of a transaction with Waskita Toll Road, a unit of another state-owned construction firm, Waskita Karya , for two parts of the Trans Java toll road, she said.

       The signings are INA’s first concrete steps since forming a toll road fund last year of up to US$3.75bil (RM15.8bil), with Caisse de dép？t et placement du Québec, APG Asset Management and a unit of the Abu Dhabi Investment Authority as co-investors.

       The signings and INA’s good governance would create greater trust in infrastructure financing in South-East Asia’s largest economy, from both domestic and international investors, Jokowi, as the president is popularly known, said.

       “I think this kind of financing scheme we will continue to develop,” he said.

       “God willing, bigger investors will come to Indonesia via the INA and not just (investing in) toll roads but also big projects that will affect the economy.”

       INA’s chief executive Ridha Wirakusumah said other projects that the fund is considering to invest in this year include sea ports, geothermal and healthcare projects.

       The wealth fund’s assets under management amounted to nearly US$6bil (RM25.3bil), but it aims to grow the figure to between US$15bil (RM63.4bil) to US$20bil (RM84.5bil) within three years supported by help from co-investors, the CEO told Reuters last month.Unlike many other sovereign wealth funds, which manage excess oil revenues or foreign exchange reserves, the INA seeks foreign funds as co-investors to finance the country’s economic development.

       Meanwhile, Bank Indonesia (BI) will raise interest rates next quarter on expectations of a hawkish stance by the United States Federal Reserve (Fed) and higher inflation, according to a Reuters poll which predicted faster-than-expected moves by the central bank this year.

       However, governor Perry Warjiyo on Wednesday reiterated his pledge to keep interest rates unchanged, even as BI sees a risk of faster monetary tightening in the US amid high global inflation.

       But Indonesia’s consumer price index (CPI) rose from 2.1% in February to a two-year high of 2.6% in March on high food price inflation.

       While that was still within BI’s targeted range of 2%-4%, economists say inflation is likely to edge up.

       A spike in global energy and food prices due to Russia’s invasion of Ukraine – some of which has already been passed on to high-end fuel – and a pick up in demand during the Ramadan festive period in April and May, were expected to push inflation higher.

       “We are of the view that the combination of an increasingly hawkish Fed and broadening price pressures will make it more difficult for BI to remain as patient as it would have liked,” said Krystal Tan, economist at ANZ.

       “March data showed inflation picking up and price pressures broadening, and inflation is set to accelerate further in April given the value-added taxes VAT rate hike and hikes to Pertamax fuel prices.”

       While BI was unanimously expected to keep its benchmark seven-day reverse repurchase rate at a record low 3.50% after the April 18-19 policy meeting, it was predicted to hike rates faster than earlier thought.

       The latest Reuters poll taken April 6-13 showed interest rates would rise to 4% and 4.25% in the third and fourth quarter, compared to 3.75% and 4% expected in a March poll.

       Five participants even predicted a 25-basis-point rate hike to come as soon as May or June.

       “BI might bring forward the start of its rate hike cycle to this quarter if the Fed’s move to front-load rate hikes in the second quarter fuels a further rise in yields and the dollar ... depressing regional currencies, especially the rupiah,” said Radhika Rao, senior economist at DBS Bank.

       The US federal funds rate is now forecast to end 2022 at 2%-2.25%, including two 50-basis-point rises in May and June, another Reuters survey showed.

       Inflation predictions for the Indonesian economy rose considerably to 3.3%, 3.8% and 4.1% for the second, third and fourth quarters from 2.8%, 3.3% and 3% in a poll taken in January. — Reuters