Moody's raises Indonesia's ratings outlook as debt ratios improve<\/p>\n
Agence France-Presse, Jakarta<\/p>\n
Rating agency Moody's Investors Service said on Friday it was
\nraising its outlook on Indonesia's sovereign ratings to
\n\"positive\" from \"stable\", citing continued improvement in the
\ncountry's debt ratios.<\/p>\n
Moody's attributed the improved government debt position to a
\ncombination of fiscal policies that kept the budget deficit low,
\nrelatively rapid growth in gross domestic product (GDP) and a
\nmore favorable exchange rate.<\/p>\n
\"As a result, the rating agency expects the government's debt
\nposition to continue to improve over the next several years,\"
\nMoody's said in a statement.<\/p>\n
The revised outlook affects Indonesia's B2 foreign currency
\ncountry ceiling for bonds, its B3 foreign currency country
\nceiling for bank deposits and the government's B2 foreign and
\nlocal currency ratings, Moody's said.<\/p>\n
\"The ratio of total external debt to current account receipts
\nhas improved since the 1997 Asian financial crisis, although it
\nremains high, and the ratio of government debt to GDP has
\nimproved steeply in the last few years,\" it said.<\/p>\n
However, Moody's said external debt remains a source of
\nvulnerability, noting that Indonesia's ratio of debt to current
\naccount receipts is higher than the average of countries in the
\nB2 rating category.<\/p>\n
On economic growth, Moody's said efforts to increase levels of
\ninvestment would be critical in order to achieve more rapid
\nprogress.<\/p>\n
It said the new government appeared intent on institutional
\nreforms to improve the investment climate, including judicial
\nreform and anti-corruption measures.<\/p>\n
Although it is too early to evaluate the success of these
\nmeasures, Moody's noted an uptick in investment towards the end
\nof 2004.<\/p>\n
The government announced earlier this week that GDP grew a
\nstronger-than-expected 5.13 percent in 2004 against revised
\ngrowth of 4.88 percent in 2003, as investment emerged as a key
\ndriver along with consumption.<\/p>\n
Should this trend continue, GDP growth may reach 5.5 percent
\nin 2005, officials said.<\/p>\n
Moody's said the December earthquake and tsunami disaster in
\nthe county's Aceh province should have no material impact on
\nIndonesia's creditworthiness despite the massive damage.<\/p>\n
It said it believed that Indonesia prefers to use loans from
\nmultilateral creditors from the Consultative Group on Indonesia
\n(CGI) rather than a debt freeze from the Paris Club of creditors
\nto help fund Aceh's reconstruction.<\/p>\n
The CGI pledged US$1.7 billion in grants and soft loans for
\nAceh and the government has indicated it may not need a debt
\nmoratorium from the Paris Club.<\/p>\n
Moves to place the ratings on review for upgrade will depend
\non progress in reforms implementation, and on investment and
\nexport performances, Moody's said.<\/p>",
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