MOODY'S UPGRADES INDONESIA'S RATINGS<\/p>\n
New York New York
\nVincent J. Truglia Steven A. Hess
\nManaging Director VP - Senior Credit Officer
\nSovereign Risk Unit Sovereign Risk Unit
\nMoody's Investors Service Moody's Investors Service
\nJOURNALISTS: 212-553-0376 JOURNALISTS: 212-553-0376
\nSUBSCRIBERS: 212-553-1653 SUBSCRIBERS: 212-553-1653<\/p>\n
MOODY'S UPGRADES INDONESIA'S RATINGS<\/p>\n
Singapore, May 19, 2006 -- Moody's Investors Service has upgraded Indonesia's ratings in light of substantial and steady improvement in government finance, with a sound record of fiscal management built up over the past several years.<\/p>\n
Specifically, the foreign currency country ceiling for bonds and the foreign- and domestic-currency government bond ratings were upgraded to
\nB1 from B2. The foreign currency country ceiling for bank deposits was upgraded to B2 from B3, while the local currency bank deposit ceiling and
\nthe local currency guideline remain unchanged at Baa2. The outlook for all the ratings is stable.<\/p>\n
Moody's said the small size of the government's deficits has brought about a major decline in government debt ratios. For example, according
\nto the rating agency, the ratio of government debt to GDP fell to below 50% at the end of last year, and further declines are expected in the
\nnext few years. This places Indonesia in a better position on this front than most countries rated B1.<\/p>\n
The structure of the government's debt also makes Indonesia less vulnerable to shocks than some other large borrowers, according to Moody's. Although somewhat more than half the debt is in foreign currency, the great majority of this debt is owed to official creditors, making the country less subject to adverse changes in external market conditions.<\/p>\n
The rating agency said that, in comparison to similarly rated countries, the level of total external debt (including both the public and private sectors) remains high. However, the risk coming from this high debt is also mitigated by the proportion owed to official creditors, according to Moody's. In addition, the performance of the balance of payments has
\nmeant that, although high, the external debt ratios are coming down and are likely to continue to do so in the next couple of years.<\/p>\n
Going forward, Moody's said that the trajectory of the rating will depend on the maintenance of sound government finances, on the success of
\ngovernment efforts to improve the investment climate, and on the actual inflow of foreign direct investment. The low level of FDI has been one factor in keeping the country's medium-term growth outlook from improving. Although the 5.6% real GDP growth rate in 2005 was the highest
\nsince the Asian financial crisis, it is still below what the government is targeting over the medium term.<\/p>",
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