RI foreign currency ceilings cut<\/p>\n
HONG KONG (Reuters): Moody's Investors Service said yesterday
\nit had downgraded Indonesia's foreign currency ceilings for bonds
\nand notes to B3 from B2.<\/p>\n
It also cut the foreign currency ceiling for bank deposits to
\nCa from Caa1.<\/p>\n
The agency said the downgrades were prompted by increasing
\nconcern over the country's deteriorating liquidity position and
\nby the Indonesian government's failure so far to meet the
\nconditions to which it committed itself in seeking international
\nfinancial assistance.<\/p>\n
As a result, the continuation of such assistance during the
\ncourse of this year cannot be assured.<\/p>\n
Moody's pointed out that the foreign assets of Indonesia's
\ncentral bank fell by over $5 billion in the first two months of
\n1998, the result of capital flight and, at least in January, a
\ndeterioration in the country's trade surplus.<\/p>\n
Recorded exports collapsed during January, the latest month
\nfor which data are available, mainly as a result of lack of
\nfinance. Because creditor confidence remains low and continued
\naccess to multilateral finance is not assured, the country's
\nability to generate export revenues remains uncertain in the near
\nterm.<\/p>\n
Moody's said it believes that this factor, when combined with
\na continued lack of confidence on the part of Indonesian and
\nforeign investors, places the country's ability to service its
\nforeign obligations in jeopardy.<\/p>\n
The downgrade of the foreign currency bank deposit ceiling to
\nCa reflects Moody's assessment that Indonesia's banks are
\ngenerally in default on foreign currency deposit obligations and
\nthat creditors of the banks may face substantive losses as the
\nliabilities are ultimately resolved.<\/p>\n
Although the Indonesian government has stated that it plans to
\nguarantee bank liabilities, such a guarantee is not yet
\noperative, Moody's said.<\/p>\n
Widespread insolvency in the banking system and lack of dollar
\nliquidity have already resulted in an inability to meet foreign
\ncurrency obligations on the part of many banks, it said.<\/p>",
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"sponsor": "Okusi Associates",
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