Aditya Suharmoko, The Jakarta Post, Jakarta

As part of an attempt to help cover the 2008 budget deficit of Rp 94.5 trillion (US$10.42 billion), the government has set the first issue of Islamic bonds -- or sukuk, for Aug. 26, an official says.

Dahlan Siamat, the Finance Ministry's director of sharia financing policy, said Thursday the government would hold a public briefing on Aug. 14 to promote the rupiah-denominated bond, but would not specify the size of the bond.

The bond will have a maturity of between seven years and 10 years, says the ministry.

Dahlan said the government "will issue the amount of sukuk in response to market demand and the coupon rate," but based on identified underlying assets of Rp 18.3 trillion.

The government will also take into consideration "the amount of dollar-denominated sukuk it wants to issue" to foreign investors, he said, which the government plans to issue at the end of October or by mid-November.

For the rupiah bond, the government has named PT Danareksa Sekuritas, PT Mandiri Sekuritas and PT Trimegah Securities to arrange the sale.

To date, the government has issued more than Rp 90 trillion in bonds, or 60 percent of its gross bond issue target of Rp 158 trillion.

Separately, the director general of the state treasury announced that the government had identified Rp 34.24 trillion in state assets as of July 28.

Part of those assets can also be used as collateral for the issuances of dollar-denominated sukuk, tapping funds from Middle-East investors who are reaping windfall profits from soaring crude oil prices.

Borrowers in the Gulf nations, including Saudi Arabia and the United Arab Emirates, sold $17.9 billion of sukuk last year, up 75 percent from 2006, according to Bloomberg.