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.