S&P downgrades Indonesia's rating<\/p>\n
The Jakarta Post, Jakarta<\/p>\n
In a widely expected move, rating agency Standard and Poor's
\ncut Indonesia's sovereign foreign currency credit rating to
\nselective default, but the government said the drop would have
\nlittle impact on investor confidence.<\/p>\n
Coordinating Minister for the Economy Dorodjatun Kuntjoro-
\nJakti said that S&P's action was technical and temporary.<\/p>\n
\"We expect the upgrade will take place as soon as the London
\nClub meeting is completed,\" he said in a statement.<\/p>\n
The London Club groups together Indonesia's private lenders,
\nwith whom the government would meet to discuss the rescheduling
\nof debts worth around US$340 million.<\/p>\n
Tuesday's rating drop marked the third fall to selective
\ndefault as a consequence of the three Paris Club deals since
\n1998.<\/p>\n
Indonesia's long term foreign currency rating prior to its
\ndrop was CCC, and C for its short-term rating.<\/p>\n
S&P's decision to lower the rating to selective default (SD)
\nfollowed the government's plan to hold talks with the London
\nClub.<\/p>\n
Indonesia recently won the rescheduling of $5.4 billion in
\ndebts to official creditors at the Paris Club, which in return
\ndemanded equal treatment of debts to private lenders.<\/p>\n
S&P had warned that seeking comparable treatment with private
\nlenders at the London Club would hurt Indonesia's country rating.<\/p>\n
A downgrade could stall foreign investment inflow, as the
\nperceived higher risk jerks up the cost of borrowing to invest in
\nIndonesia.<\/p>\n
But Dorodjatun was upbeat the downgrade was only temporary and
\nthat it would not affect international confidence in Indonesia.<\/p>\n
He said foreign confidence had been on the rise thanks to
\nconsistent progress on economic reform policies.<\/p>\n
This is most visible in the local stock market, where an
\ninflux of foreign capital has helped the index gain more than 35
\npercent since early this year.<\/p>\n
Under the International Monetary Fund (IMF)'s tight reform
\ntargets, the government has been pushing through reform policies
\nalthough many have progressed slowly.<\/p>\n
Among the key achievements were last year's signing of a new
\nlending agreement with the IMF, the sale of Bank Central Asia
\n(BCA), and the debt rescheduling deal with the Paris Club.<\/p>\n
\"There should be no doubt, we will continue these reforms,\"
\nDorodjatun said.<\/p>\n
Standard Chartered Bank economist Fauzi Ichsan told The
\nJakarta Post that S&P's downgrade would have a minor impact on
\nthe economy.<\/p>\n
He said most analysts had expected the move, with S&P giving a
\nwarning earlier this year.<\/p>\n
Bank Mandiri chief economist Martin Panggabean agreed, adding
\nthat rival rating agency Moody's had maintained Indonesia's
\ncountry risk rating in spite of the upcoming London Club talks.<\/p>\n
The rupiah closed Tuesday trading lower at 9,400 against the
\nU.S. dollar from 9,255 on Monday.<\/p>\n
On the stock market, however the index rose 1.4 percent to end
\nTuesday's trading at 543.06 points.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/sp-downgrades-indonesias-rating-1447893297",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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