Sound economy, better debt rating to raise 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.