Indonesia's rating outlook remains stable despite doubts<\/p>\n
JAKARTA (JP): The United States-based rating agency Moody's
\nmaintained its B3 foreign currency country ceiling for Indonesian
\nbonds and notes, despite the country's uncertain financial
\nposition.<\/p>\n
Moody's said on Wednesday that the rating was compatible with
\nthe current volatility in the country's political situation and
\neconomy, adding that Indonesia's outlook remained stable.<\/p>\n
\"It is significant, however, that the bank deposit ceiling is
\nat Caa1, indicating that transactions with banks in Indonesia
\npose very significant risk. Thus, London Club reschedulings, such
\nas occurred last year, are fully anticipated by the ratings,\" the
\nrating agency said in a statement.<\/p>\n
Moody's believes, also, that there is some risk that the
\nIndonesian government will impose a moratorium or a new payment
\nregime for Indonesian corporations that have foreign debt. Thus,
\nall ratings of Indonesian-based corporations are below the B3
\ncountry ceiling.<\/p>\n
\"In effect, the B3 foreign currency country ceiling is based
\non the expectation that the government of Indonesia will continue
\nto service its single remaining sovereign bond. That bond is due
\nin 2006, and the interest cost is so small that under almost any
\nscenario it is serviceable,\" it added.<\/p>\n
Moody's also saw the possibility that the Indonesian
\ngovernment's attitude toward foreign creditors might turn
\nnegative, or that there would be a general moratorium.<\/p>\n
Under the most likely scenarios envisioned by the rating
\nagency, however, the sovereign bond will continue to be serviced.
\nHowever, since there are a number of factors that could
\nnegatively affect timely repayment, a B3 rating appears to best
\ncapture the credit risks involved, Moody's said.<\/p>\n
According to the rating agency, the political and social
\nturmoil in Indonesia, including but not limited to events
\nsurrounding the presidency, has seriously eroded the government's
\nability to implement economic policy.<\/p>\n
The vote of the House of Representatives on May 31 calling for
\na special session of the People's Consultative Assembly beginning
\non Aug. 1 to consider removing the President indicates the
\nturmoil will likely continue for at least the next few months, it
\nsaid.<\/p>\n
Moody's said some of the effects of this situation include: a
\nserious fiscal imbalance brought about by higher subsidies; lack
\nof progress in disposing of assets held by the Indonesian Bank
\nRestructuring Agency; rising inflation due to exchange rate
\ndepreciation, which results from lack of confidence on the part
\nof Indonesians and foreigners; continued problems with corporate
\nsector external debt; and lack of access to credit from foreign
\nofficial (let alone private) creditors. All of these factors
\naffect Indonesia's creditworthiness.(hen)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/indonesias-rating-outlook-remains-stable-despite-doubts-1447893297",
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