Moody's raises Indonesia's ratings outlook as debt ratios improve
Moody's raises Indonesia's ratings outlook as debt ratios improve
Agence France-Presse, Jakarta
Rating agency Moody's Investors Service said on Friday it was raising its outlook on Indonesia's sovereign ratings to "positive" from "stable", citing continued improvement in the country's debt ratios.
Moody's attributed the improved government debt position to a combination of fiscal policies that kept the budget deficit low, relatively rapid growth in gross domestic product (GDP) and a more favorable exchange rate.
"As a result, the rating agency expects the government's debt position to continue to improve over the next several years," Moody's said in a statement.
The revised outlook affects Indonesia's B2 foreign currency country ceiling for bonds, its B3 foreign currency country ceiling for bank deposits and the government's B2 foreign and local currency ratings, Moody's said.
"The ratio of total external debt to current account receipts has improved since the 1997 Asian financial crisis, although it remains high, and the ratio of government debt to GDP has improved steeply in the last few years," it said.
However, Moody's said external debt remains a source of vulnerability, noting that Indonesia's ratio of debt to current account receipts is higher than the average of countries in the B2 rating category.
On economic growth, Moody's said efforts to increase levels of investment would be critical in order to achieve more rapid progress.
It said the new government appeared intent on institutional reforms to improve the investment climate, including judicial reform and anti-corruption measures.
Although it is too early to evaluate the success of these measures, Moody's noted an uptick in investment towards the end of 2004.
The government announced earlier this week that GDP grew a stronger-than-expected 5.13 percent in 2004 against revised growth of 4.88 percent in 2003, as investment emerged as a key driver along with consumption.
Should this trend continue, GDP growth may reach 5.5 percent in 2005, officials said.
Moody's said the December earthquake and tsunami disaster in the county's Aceh province should have no material impact on Indonesia's creditworthiness despite the massive damage.
It said it believed that Indonesia prefers to use loans from multilateral creditors from the Consultative Group on Indonesia (CGI) rather than a debt freeze from the Paris Club of creditors to help fund Aceh's reconstruction.
The CGI pledged US$1.7 billion in grants and soft loans for Aceh and the government has indicated it may not need a debt moratorium from the Paris Club.
Moves to place the ratings on review for upgrade will depend on progress in reforms implementation, and on investment and export performances, Moody's said.