Mon, 16 Jul 2007
Moody’s Investors Service is considering an upgrade in Indonesia’s sovereign debt rating, according to a Bloomberg News report citing two analysts with the rating agency.

Steven Hess and Thomas Byrne said Friday (13/7/07) that the government is handling national finances well and has brought political stability to the country.

Byrne told a briefing for reporters in Singapore that Indonesia and Vietnam were the two regional states being considered for an upgrade.

”The Indonesian government is doing a pretty good job,” said Hess. “We've seen a period of relative political stability under President Susilo Bambang Yudhoyono.”

Hess added that Indonesia had succeeded in reducing debt significantly after it reached over 100% with the financial crisis a decade ago. “There is gradual improvement in Indonesia's credit fundamentals,” he said. “We're fairly confident that government debt ratios are going to improve further.”

Moody's raised Indonesia's debt rating outlook to ``positive'' from ``stable'' in February and affirmed its long- term foreign currency debt rating of B1, the fourth-highest non-investment
grade.

Fitch rates Indonesia's debt at BB-, the third highest non-investment grade, while Standard & Poor's ranks Indonesia's dollar-denominated debt at BB- with a stable outlook.

In Jakarta, Finance Minister Sri Mulyani Indrawati said debt will have fallen to around 35.6% of GDP at Rp1,325 trillion ($147.1 billion) by the end of the year, slightly above the end-2006 level of Rp1,310 trillion, largely because of currency fluctuations.

The Jakarta Stock Exchange composite index closed the week at another new high, partly led by gains on Wall Street but also on expectations of stronger first-half earnings. The index closed the week at 2,301.601, while the rupiah was trading at 9,025/9,030 to the dollar late Friday.

Members of the senior management of state-owned Bank Negara Indonesia (BNI) were to set off on roadshows to sell a 26% share in the bank expected to gross over $900 million in a secondary issue in August designed to tap the buoyant market.

"Two teams will head to New York, San Francisco, Boston, Singapore, Hongkong, Edinburgh and Frankfurt, starting on July 18," BNI president director Sigit Pramono told Reuters.

In Washington, a joint study by the World Bank and the Indonesian government was released on Tuesday, stating that Indonesia is currently seeing its largest increase in development spending in three decades.

It said a sharp reduction in fuel subsidies in 2005, declining debt service payments and increasing revenues have provided an additional $15 billion - of the total national budget of $70 billion - for critical development needs.

"Indonesia is now less vulnerable, and stronger than before. Indonesia finds itself in a situation of fiscal strength," said Jim Adams, the World Bank's vice president for East Asia and Pacific, who launched the report.

"The country is moving in the right direction, with challenges in governance and improving public services. The country is now in a position to use this fiscal strength to address those challenges more effectively."

The report notes that while education now tops budgetary spending at 17%, higher investments in the sector would be highly beneficial. Payment on debt is strongly down from number 1 in 2001 (25%) to fifth position with 11% of spending.

“Infrastructure . . . has only recovered very modestly to 11% from its post-crisis downturn,” says the report.

The Coordinating Ministry of Economic Affairs stated that 21 out of 28 reform actions due in June had been completed and the remaining seven were underway.

Coordinating Minister for Economy Boediono reported to the president that another 4 actions had been completed ahead of time, a statement said.

The completed steps included improvement in investment regulations, financial sector reform, infrastructure development acceleration, and empowerment of micro, small and medium enterprises. Steps had also been taken in entrepreneurial and human resources development.



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