Wed, 27 Jan 2010
Jakarta (ANTARA News) - The Finance Ministry expects Indonesia`s upgraded credit rating from BB to BB+ to encourage more foreign investment inflows to the country.

"It is expected the upgraded credit rating will not only make the cost of borrowing more efficient but also encourage more foreign investment inflows to Indonesia because of declining country risk," the ministry`s director general of debt management, Rahmat Waluyanto, said on Monday.

Given the upgraded rating, the country would only need one more notch to reach an investment grade, he said.

International rating agency Fitch Ratings upgraded Indonesia`s credit rating from BB to BB+ on Monday. The rating`s outlook is stable.

The upgraded rating is for Indonesia`s long-term debts. Fitch also upgraded the rating of Indonesia`s country ceiling from BB+ to BBB and maintained the rating of its short-term debt at B.

Rahmat said there were several factors underlying Fitch`s decision to raise Indonesia`s credit rating. The factors included Indonesia`s success in weathering the 2008 global crisis as reflected by its economic growth momentum and manageable financial system.

The upgraded rating also suggested international recognition of fiscal and monetary authorities` performance in managing the state budget including state debts, he said.

Ai Ling, a director in Fitch`s Sovereign Ratings team, said the rating reflected Indonesia`s relative resilience to the 2008-2009 severe global financial stress test, underpinned by continued improvements in the country`s public finances, a fundamental sovereign rating strength, and a material easing of external financing constraints.

Fitch also noted that Indonesia`s public debt ratio continued to fall to only 30 percent of its gross domestic product (GDP) in 2009. Foreign exchange reserves, including gold also rose by 28 percent to US$66 billion and the economic growth increased to 4.6 percent last year.

But Fitch added the priority risk of long-term development would overshadow the performance if inefficient fiscal spending remained unsolved in line with deferred increase in electricity tariffs and fuel oil prices. (*)



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