RI's credit rating faces challenges: U.S. agency

RI's credit rating faces challenges: U.S. agency

NEW YORK (AFP): The U.S. agency Standard and Poor's on
Thursday warned that Indonesia's credit rating depended on how
effectively its new leaders restore order, complete corruption
probes and deal with the army.

Standard and Poor's, in an assessment following the election
of Indonesian President Abdurrahman Wahid and Vice President
Megawati Soekarnoputri, said the new team faces "multiple
political and economic pressures."

The agency noted that the triple-C-plus long-term foreign
currency credit and unsecured debt ratings it has assigned to
Indonesia suggest "a high risk of default" on the country's
US$2.3 billion foreign currency commercial debt.

It said the first priority for the new administration was the
restoration of law and order following protests by Megawati
supporters following her surprise defeat in Wednesday's
presidential ballot in the Consultative Assembly.

Other tests for the new team will be to ensure that corruption
investigations do not delay economic policy measures and to
"maintain cordial relations with the army, which remains a major
force in Indonesian politics."

Standard and Poor's called for continued commitment by the
government to central bank independence and to low inflation as
well as the resolution of a scandal at Bank Bali.

Principal payments on the country's general government debt,
which now amounts to 110 percent of gross domestic product, are
set to increase from about $2 billion in 1999 to $5 billion next
year and $9 billion in 2001-2002.

Standard and Poor's predicted that another round of debt
restructuring by Indonesia's official creditors in the Paris Club
would be necessary to support expansionary budgets in 2000 and
2001.

But the agency did not rule out the possibility that Jakarta
might go further and seek both debt reduction and rescheduling.

"Over the long term ... a substantial reduction in Indonesia's
external debt burden is likely to be necessary to support
economic recovery and to rebuild the (government's) credit
rating," it said.