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.