S&P's puts Indonesia's ratings on credit watch<\/p>\n
JAKARTA (JP): U.S.-based rating agency Standard & Poor's has
\nplaced Indonesia's triple C+ long-term and C short-term sovereign
\nand unsecured foreign currency credit ratings on its credit watch
\nlist with negative implications.<\/p>\n
The rating agency said in a statement on Monday that the
\nratings for Indonesia were put on the list over concerns that the
\nEast Timor issue would affect the disbursement of financial
\nassistance.<\/p>\n
\"The credit watch listing reflects the risk that official
\nfinancial support from the International Monetary Fund, the World
\nBank and Paris Club creditors may be curtailed for an extended
\nperiod owing to developments in East Timor,\" the rating agency
\nsaid in a statement.<\/p>\n
The risk was also due to the high vulnerability of Indonesia's
\ncentral bank to the confidence sensitive capital movements,
\ndespite the bank's adequate level of US$26.8 billion in reserves
\nas of Sept. 9.<\/p>\n
The rating agency said the vulnerability was reflected in the
\nrenewed downward pressure on the rupiah and was reliant on
\ncontinued flows of multilateral and bilateral assistance.<\/p>\n
It reiterated that future disbursements would be in jeopardy
\nif the crisis in East Timor could not be speedily resolved.<\/p>\n
\"The situation is further complicated by the political
\ntransition underway in Indonesia, with presidential elections in
\nNovember, reports of growing friction between the military and
\nthe Habibie administration and recent proposals by the government
\nfor a second round of Paris Club debt rescheduling,\" the agency
\nadded.<\/p>\n
The rating agency said the credit watch listing was expected
\nto be resolved within several weeks.<\/p>\n
It said that a downgrade would occur if financial assistance
\nfrom multilateral and bilateral creditors was substantially
\nreduced.<\/p>\n
The downgrade in ratings was also possible if the future Paris
\nClub rescheduled agreements, including burden-sharing
\nstipulations, would lead to an effective default on Indonesia's
\noutstanding $776 million of rated foreign currency debt.<\/p>\n
The rating agency also affirmed on Monday its ratings on state
\nBank Negara Indonesia (BNI), namely the triple C plus \/ C for the
\nbank's local currency and triple C minus \/ C for foreign currency
\ncredit.<\/p>\n
The rating agency's review did not mention anything relating
\nto President B.J. Habibie's announcement on Sunday about
\nIndonesia's readiness to receive international peacekeepers in
\nEast Timor.<\/p>\n
International donors earlier warned Indonesia that they would
\nsuspend aid if the country rejected the call to enforce
\npeacekeeping forces in the troubled territory.<\/p>\n
BNI<\/p>\n
At the same time, the rating agency also affirmed its triple C
\nminus rating on BNI's $145 million note due in 2007.<\/p>\n
\"The ratings on BNI already incorporate the view that the bank
\nremains vulnerable and dependent on favorable business and
\nfinancial and economic conditions to meet its financial
\ncommitments,\" the agency said.<\/p>\n
The rating agency said the outlook on the ratings for BNI
\nremained negative given the government's delay in recapitalizing
\nthe bank and the volatile operating environment facing the bank.<\/p>\n
It said that the government's already slow recapitalization of
\nthe bank would further be disrupted by the potential curtailment
\nof official financial support.<\/p>\n
The recapitalization of BNI started in July following the
\nsigning of a memorandum of understanding between the Indonesian
\ngovernment and IMF, under which the government would inject
\ncapital into BNI in three stages: Sept. 30, Dec. 31 and March
\n2000.<\/p>\n
The program took place after BNI announced an equity deficit
\nof $5.4 billion, at an exchange rate of Rp 8,000 to one U.S.
\ndollar, equivalent to 79 percent of total assets as of Dec. 31
\nlast year. (cst)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/sps-puts-indonesias-ratings-on-credit-watch-1447893297",
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"sponsor": "Okusi Associates",
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