Indonesia is selling $2 billion in the form of a US-currency sukuk, its first such issuance in 18 months against the backdrop of a global rise in borrowing costs.

Southeast Asia’s largest economy set the size for $1 billion of five-year Sharia-compliant notes for general financing, according to a person familiar with the matter, who asked not to be identified as they are not authorized to speak about it. It also launched $1 billion worth of 10-year green notes for expenditure as outlined under its sustainable securities framework.

The transaction may price later on Tuesday during New York business hours.

The sharp rise in US interest rates over the past two years is having knock-on effect on economies around the world including Indonesia, where the government regularly taps the offshore bond market. Officials in Jakarta sold dollar debt in January, while their last dollar sukuk transaction took place in May 2022.

Bloomberg’s analysis of data at the initial price talk stage indicated the deal was being offered at a premium to the seller’s existing dollar securities. In addition to the change in US interest rates, other factors may also contribute to the difference in the offer pricing.

While the Indonesian government didn’t lay out exactly how the green proceeds would be allocated, its sustainable securities framework lists a number of projects, such as developing wind or hydro-power plants, or implementing energy performance standards and energy efficient labels for equipment.

Earlier this year, Indonesia sold yen-denominated bonds, with funds from some tranches earmarked for ocean conservation and climate change mitigation.

CIMB Group Holdings, Citigroup Inc., Dubai Islamic Bank PJSC, Mandiri Securities and Standard Chartered Bank Plc acted as joint bookrunners for the deal, according to the person.

--With assistance from Yudith Ho and Christopher DeReza.

(Updates with launch details throughout.)