Rupiah assigned B-3 rating

Rupiah assigned B-3 rating

NEW YORK (Dow Jones): Moody's Investors Service said it assigned a B3 issuer rating to rupiah obligations of Indonesia.

Issuer ratings are used to provide an opinion about the debt- service capacity of a government that may have no outstanding long-term general obligation debt, Moody's said.

Moody's said that the government of Indonesia, "although heavily indebted in foreign currencies, has until now not financed its budget deficits through the issuance of long-term domestic bonds.

"Although Bank Indonesia, the country's central bank, has issued short-term notes for monetary policy purposes, the government has no long-term bonds denominated in rupiah. Moody's believes that this could change in the future, as the government is now in a period of substantial budget deficits as a result of the severe economic downturn affecting the country," Moody's said.

Moody's said the B3 rating "reflects the government's heavy, and rapidly increasing, debt burden. Because of the large depreciation of the rupiah during the last year, the ratio of Indonesia's public sector debt to GDP has risen to a very high level.

"At the same time, the budget deficit during the current year is likely to reach 10 percent of GDP, financed mainly by borrowing from foreign official creditors. The government is in the process of rescheduling some of this debt.

"Thus, Moody's believes that the government's ability to meet its obligations, whether domestic or foreign, is likely to remain under strain for some time to come," the rating agency said.