Japan R&I cuts RI rating

Japan R&I cuts RI rating

TOKYO (Dow Jones): Japan Rating and Investment Information
Inc. (R&I) said Tuesday it has downgraded Indonesia's foreign
currency long-term debt rating to B-from B, while affirming the
country's foreign currency short-term rating at B.

The Indonesian economy has gradually started on the road to
recovery, as seen in signs of a recovery in consumption thanks to
the stability of the rupiah market and falling inflation and
lower interest rates, R&I said.

But the ratings agency cites problems such as the financial
sector's nonperforming loans and the problem of corporate debt.

In the event that the turmoil over independence for East Timor
becomes drawn out and political instability intensifies as the
November presidential election approaches, "the economy could
once more be forced into decline," R&I said.

The World Bank, International Monetary Fund and foreign
governments have taken the claims of improper deals by Bank Bali,
a major commercial bank, as a cue to suspend the supply of funds,
"and this could also have an impact in areas such as foreign
exchange liquidity and fiscal management," R&I said.