Wed, 19 Jan 2011

TEMPO Interactive, Jakarta:Bank Indonesia Governor Darmin Nasution said the decision made by Moody's to increase Indonesia’s debt rank was an acknowledgment from the international community that Indonesia’s fundamentals were improving.

Darmin said Moody’s had good reason to increase Indonesia’s rank because the country had strong domestic demand, accurate structural reform and rising direct investment. “Foreign debt has also decreased and foreign exchange reserves are sufficient,” he said.

Darmin hoped the Moody’s rating would allow Indonesia to attract more investment, strengthen the expansion of economic sectors and create more jobs. “I also hope the rating will improve the investment grade within the next year,” he added.

The former tax director-general called on the government to provide infrastructure to control inflation, study the financial market and repair the capital flow structure toward long-term investment.

Finance Minister Agus Martowardojo said that Indonesia’s improved debt rating would allow the government to manage its debt more efficiently. “The interest rate imposed on Indonesia should be better than before,” he said.

Agus also said he hoped that Indonesia could soon achieve the investment grade rank by improving budget management, maintaining inflation and managing capital flows. Moody’s yesterday increased Indonesia’s debt rate in foreign and local currencies from Ba2 to Ba1 with stable prospects.

This rank is only one level below the investment grade.

Moody's judged that Indonesia has been able to maintain macro-economic balance, improve its debt position, gather enough foreign exchange and attract direct investments.

Economic analyst from PT Samuel Sekuritas, Lana Soelistiangsih, said the rate improvement would make Indonesia’s term notes more suitable for premium trading with more measured risks. “The short-term funds in the domestic investment market will stay longer and no longer be speculative funds,” Lana said.