JAKARTA (Dow Jones)--The Indonesian government is studying the possibility of issuing U.S. dollar-denominated bonds domestically as part of its plan to develop the country's nascent bond market, a government official said Tuesday. A recent government survey found such bonds would be of interest to the market, Bhimantara Widyajala, director of government debt securities at the finance ministry, told Dow Jones Newswires. "The next step is to prepare the infrastructure and suprastructure for the issuance, including an auction system and related regulations," he said. Widyajala declined to say when the government might issue such securities. He added that any issuance of dollar-denominated bonds in the local market wouldn't replace the government's dollar bond offerings overseas. The government has turned to the domestic bond market to fund its budget deficit, as its usual source of funds, the sales of stakes in state-owned companies, has dried up after it privatized the best state firms. The government has issued IDR700.18 trillion ($83 billion) tradable rupiah-denominated bonds, of which around 35% is held by foreign investors. Bank Indonesia Deputy Gov. Budi Mulya told Dow Jones Newswires last week that Indonesia needed to develop its capital markets to absorb strong fund inflows. -By I Made Sentana, Dow Jones Newswires; 62 21 39831277; i-made.sentana@dowjones.com

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