RI foreign currency ceilings cut
RI foreign currency ceilings cut
HONG KONG (Reuters): Moody's Investors Service said yesterday it had downgraded Indonesia's foreign currency ceilings for bonds and notes to B3 from B2.
It also cut the foreign currency ceiling for bank deposits to Ca from Caa1.
The agency said the downgrades were prompted by increasing concern over the country's deteriorating liquidity position and by the Indonesian government's failure so far to meet the conditions to which it committed itself in seeking international financial assistance.
As a result, the continuation of such assistance during the course of this year cannot be assured.
Moody's pointed out that the foreign assets of Indonesia's central bank fell by over $5 billion in the first two months of 1998, the result of capital flight and, at least in January, a deterioration in the country's trade surplus.
Recorded exports collapsed during January, the latest month for which data are available, mainly as a result of lack of finance. Because creditor confidence remains low and continued access to multilateral finance is not assured, the country's ability to generate export revenues remains uncertain in the near term.
Moody's said it believes that this factor, when combined with a continued lack of confidence on the part of Indonesian and foreign investors, places the country's ability to service its foreign obligations in jeopardy.
The downgrade of the foreign currency bank deposit ceiling to Ca reflects Moody's assessment that Indonesia's banks are generally in default on foreign currency deposit obligations and that creditors of the banks may face substantive losses as the liabilities are ultimately resolved.
Although the Indonesian government has stated that it plans to guarantee bank liabilities, such a guarantee is not yet operative, Moody's said.
Widespread insolvency in the banking system and lack of dollar liquidity have already resulted in an inability to meet foreign currency obligations on the part of many banks, it said.