Rating upgraded to strengthen rupiah: BI

Rating upgraded to strengthen rupiah: BI

Urip Hudiono, The Jakarta Post/Jakarta

Global acknowledgement of the country's macroeconomic stability,
as evident in the recent upgrading of Indonesia's debt rating,
would boost positive sentiment in the rupiah, possibly to below
the Rp 9,000 level, according to the central bank.

The upgrade would also benefit the government's plan to issue
up to US$1.5 billion in sovereign bonds during the first quarter
of this year, the banks said.

"It will certainly create a positive effect on our economy, be
it be on our issuance of global bonds, or on the rupiah exchange
rate," BI deputy governor Aslim Tadjudin said on Friday.

Confident in the government's clear policies in improving the
country's economy, global rating agency Fitch Ratings upgraded on
Thursday Indonesia's long-term foreign and local currency ratings
to BB- from B+, and affirmed its short-term rating at B, both
with positive outlooks. The rating remains two-levels from the
investment grade of BBB-.

Standard and Poor's, meanwhile, had also recently raised
Indonesia's creditworthiness rating. It upgraded Indonesia's
long-term foreign currency to B+ from a B and the local currency
rating to BB from B+.

Reflecting the positive sentiment on Friday, the local unit
traded higher at Rp 9,145 against the dollar, after closing flat
at Rp 9,146 the previous day. The Jakarta Stock Exchange's
Composite Index, meanwhile, closed at 1,046.48 points, having
risen by 1 percent the day before on news of the Fitch upgrade.

Aslim said, however, the government still needed to work hard
if it wanted to see a further rise in the credit ratings and
further positive effects on the economy.

"The government's commitment to improving the economy is
strong and it has targeted an average 6 percent economic growth
over the next five years," he said.

"But it will still depend on how we proceed on those targets
-- the faster we can deliver, the more positive sentiment we can
gain."

Aslim added that the rupiah was actually still undervalued,
providing more leeway for further gains.

"Foreign currency analysts even predict that the rupiah could
gain, to up to Rp 8,500 per dollar," he said.

"Such a level is also still positive for both importers and
exporters."

Meanwhile, finance ministry's fiscal analysis agency head,
Anggito Abimanyu, said what was more important from the new
ratings was their medium-term effects.

"It would mean an immediate lowering of our credit risks,
resulting in lower interest rates and easier terms and conditions
in obtaining credit," he said.

State Minister of National Development Planning Sri Mulyani
Indrawati, meanwhile, said she expected global rating agency
Moody's, which would issue its rating assessment on the country
later on this quarter, would be fair in reviewing their new debt-
rating for Indonesia.

Sri Mulyani was hopeful the agency would also paint a positive
outlook for Indonesia's credit rating in relation to the debt
moratorium granted by creditor nations grouped under the Paris
Club to Indonesia.

"Of course, they have their independence in determining their
rating, but we hope that the debt moratorium from the Paris Club
would not downgrade our rating," she said, asserting that
Indonesia had not "requested" the moratorium, but was offered
it", in light of the tsunami disaster in Aceh.

At present, Moody rates Indonesia's ceiling for foreign
currency debt at B2, while its ceiling for foreign-currency bank
deposits is rated B3 -- both considered stable.