BankWatch downgrades Indonesian rating<\/p>\n
JAKARTA (JP): Bank credit rating agency Thomson BankWatch
\ndowngraded its sovereign risk rating for Indonesia from BB to B+
\non the country's heightening political uncertainty.<\/p>\n
Thomson BankWatch sovereign risk director Betty J. Starkey
\nsaid in a statement Monday, \"This downgrade is based not only on
\nthe country's deteriorating financial situation, but more
\nimportantly on the heightening political uncertainty.\"<\/p>\n
She noted the weakening public confidence in the country's
\npolitical leadership had surfaced over the past several days,
\nwith signs of panic buying and hoarding on the part of local
\nconsumers and mounting calls for President Soeharto to step down.<\/p>\n
\"Overall, these increasing political pressures have raised the
\nspecter of a leadership crisis at a time of a deepening financial
\nand economic crisis,\" Starkey said.<\/p>\n
BankWatch said it was especially concerned with the impact of
\nthe drastic fall of the rupiah against the U.S. dollar over the
\npast week.<\/p>\n
The rupiah has lost about 70 percent of its value against the
\ndollar since July.<\/p>\n
\"As a result, short-term debt pressures and the risk of
\nincreased corporate bankruptcies have been exacerbated,\"
\nBankWatch said.<\/p>\n
\"Now there is concern over whether the US$40 billion emergency
\nassistance package arranged by the International Monetary Fund
\n(IMF) last October will be sufficient to cover the country's
\nmounting financial obligations,\" it said.<\/p>\n
Indonesia's outstanding foreign debt stood at $118 billion as
\nof last September, of which $65 billion was owed by the private
\nsector.<\/p>\n
BankWatch also shared new doubts over the Indonesian
\ngovernment's willingness to comply with the terms and targets of
\nthe IMF assistance package.<\/p>\n
It said the 1998\/1999 draft state budget, announced last week,
\ndisregarded the economic targets set by the IMF.<\/p>\n
The agency shared others' criticism that projections used in
\ndrafting the budget were unrealistic, especially those concerned
\nwith the exchange rate, annual economic growth and inflation.<\/p>\n
\"With most private forecasts predicting economic recession and
\ndouble digit inflation this year, the government's budgetary and
\neconomic goals could prove difficult to meet,\" it said.<\/p>\n
Starkey continued: \"Even in the event of IMF compliance, we
\nremain concerned over the adequacy of the current IMF package,
\nespecially in light of the country's continued financial
\ndeterioration.\"<\/p>\n
Of even greater concern, Starkey said, was the weakening
\nconfidence in the current political leadership, the emerging
\nprospect of increased social unrest -- triggered by mounting
\nunemployment -- and lingering uncertainty over how the future
\npolitical transition would unfold.<\/p>\n
Meanwhile, Standard & Poor's Corp said from Tokyo yesterday it
\nmay further cut its ratings for the sovereign debt of Indonesia,
\nSouth Korea, Malaysia and Thailand in 1998.<\/p>\n
\"Further downward rating actions may occur in Indonesia,
\nKorea, Malaysia and Thailand,\" S&P president Leo O'Neill was
\nquoted by Reuters as saying.<\/p>\n
The Asian turmoil may also have an impact on the credit
\nstanding of governments outside the region \"if the crisis deepens
\nand adversely affects economies elsewhere,\" the statement quoted
\nO'Neill as saying in his annual \"State of the Global Credit
\nMarkets\" report.<\/p>\n
O'Neill also said the credit outlook for most Asian financial
\ninstitutions was negative, while the outlook for most North
\nAmerican and Western European financial institutions was stable.
\n(rid)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/bankwatch-downgrades-indonesian-rating-1447893297",
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