Moody's puts RI on review for possible upgrade
The Jakarta Post, Jakarta
A substantial reduction in government debt ratios and reduced external vulnerability have prompted Moody's Investors Service to place Indonesia's ratings on review for possible upgrade.
The ratings under review are the B3 foreign currency country ceiling for debt, the B3 rating of the foreign currency bonds of the government of Indonesia, the B3 domestic currency issuer rating of the government, and the Caa1 foreign currency bank deposit ceiling.
Moody's said on Thursday in a statement that the country's improved debt ratios were due to the fiscal policy that had been pursued by the government and to the strengthening of the exchange rate.
In addition, the external vulnerability of the country has been considerably reduced as the current account has remained in surplus, external debt of both the government and the private sector has been restructured, and international reserves have risen.
Despite these improvements, the rating agency believed that Indonesia remained vulnerable to unforeseen shocks, either internal or external.
In addition, economic growth has not yet returned to a rate that would contribute to increases in employment and living standards over the medium term. As a result, political and social stability could also be vulnerable to any negative shocks.
"Improvements in the investment climate could alleviate some of this problem," it said.
The review of the ratings will concentrate on the country's external financing requirements and their viability over the next couple of years.
The Indonesian government is considering whether or not to request a new IMF program after the expiration of the current extended facility at the end of this year. The country's external financial position could be more vulnerable than otherwise without further funding from the IMF and the option of a third Paris Club rescheduling of official bilateral debt.
In a related development, Moody's placed the Caa1 long-term bank deposit country ceiling ratings of eight Indonesian banks on review for possible upgrade.
The eight banks are Bank Danamon Indonesia, Bank Internasional Indonesia, Bank Mandiri, Bank Negara Indonesia, Bank Permata, Bank Rakyat Indonesia, Bank Tabungan Negara and Pan Indonesia Bank.
At the same time, the agency placed on review for possible upgrade the B3 senior debt ratings for Bank Mandiri and Bank Negara Indonesia. The Not-Prime short-term deposit and bank financial strength ratings of all eight banks are unaffected.
In addition, the B3 subordinated debt ratings of Bank Mandiri and Bank Negara Indonesia are unaffected. The ratings are detailed below.
"This action follows the placement of Indonesia's sovereign ratings - B3 foreign currency country ceiling for debt, B3 foreign currency bonds of the government, B3 domestic currency issuer rating of the government and Caa1 foreign currency bank deposit ceiling - on review for possible upgrade," it said.