S&P affirms RI's long term rating

S&P affirms RI's long term rating

SYDNEY (Reuter): Standard and Poors Corp (S&P) said yesterday it had affirmed Indonesia's long term foreign currency rating at BBB and assigned its A-plus local currency rating.

S&P said the outlook for the ratings was stable.

S&P said the ratings are supported by Indonesia's long standing commitment to prudent fiscal management.

Savings and investment rates of over 30 percent of GDP, amongst the highest in the BBB category, should substain GDP growth averaging eight percent annually, it said.

"The higher rupiah credit rating standing is further supported by the central government's insignificant rupiah debt burden and Bank Indonesia's long track record of containing inflation to single-digit levels," S&P said.

S&P said Indonesia's creditworthiness is constrained by substantial infrastructure development needs, which, in the context of low per capita income compared to similarly rated sovereigns, will pressure government finances medium term.

It added that creditworthiness is also constrained by the risk that the eventual political transition may slow, though not derail, the ongoing microeconomic reform process and the uneven trend toward improving transparency.

"President Soeharto is likely to be re-elected in 1998, but his eventual exit from politics will test confidence and challenge his successors to maintain support for economic policy orthodoxy and further structural reform," S&P said.

"Indonesia's consenus-based political culture, the widely shared benefits of economic development, and a technocratic leadship augur well for economic policy stability during the transition and beyond," the ratings agency said.

Public finances should strengthen as ongoing tax reforms bolster non-oil revenues and would benefit too from additional privatisation, it said.