Moody's paints positive outlook for RI

The Jakarta Post, Jakarta

International credit rating agency Moody's Investors Service has maintained its positive outlook for Indonesia, on the back of the country's political stability and continued commitments to reform.

"This (positive outlook) is due to a diversified economy that helps check volatility, increased -- though not perfect -- political stability, and progress in reform that has been achieved since the election of President Megawati Soekarnoputri in 2001," Moody's vice president Steven Hess said in the agency's annual report, as reported by Dow Jones.

The U.S.-based agency said the country had made some progress in several key areas of its reform program, especially in its asset sales, including crucial privatization and divestment of government shares in recapitalized banks.

Despite constant public pressure against selling national assets, Indonesia has been making some headway in the two programs.

Only recently, the government sold its stake in the country's second largest telecommunications firm PT Indosat. The government has also started the divestment process of Bank Danamon.

Moody's also pointed to a stable fiscal performance as another reason for the encouraging note on Indonesia.

"The government's fiscal performance is also better," said Hess. "The budget deficit target was met in 2002, and the government's revised fiscal targets for 2003 appear achievable, although the margin for error is not great."

Nevertheless, the agency also noted some areas the country needed to address.

It said that Indonesia's B3 country ceiling for foreign currency debt reflected the continued fragility of its external finances due to a lack of investor confidence, continued weakness in the banking sector and high public-sector debt.

It also warned of a possible worsening of the country's financial condition next year, when it terminates the existing role of the International Monetary Fund in designing reform programs.

The economic ties between Indonesia and the IMF, which was started in 1999, ends at the end of this year.

However, debates have already been intensified over the need for the country to quickly split from the IMF, with critics saying that many of the IMF's programs have played a part in pushing the economy deeper into crisis.

"Statements from some in the government concerning relations with the IMF are causing us to look closely at the country's financial position next year," Hess said.