S&P raises RI's rating

S&P raises RI's rating

JAKARTA (JP): Standard & Poor's, one of the world's
influential rating agencies, has raised its long-term foreign
currency rating of Indonesia to triple B (BBB) from triple B
minus (BBB-).

The agency said yesterday that the upgrade reflects
Indonesia's record of prudent financial management and
macroeconomic reforms, which have strengthened government
finances and diversified the country's crude oil-dependent
economy.

The agency's triple B rating implies entities which have an
adequate capacity to pay interest and repay principals in a
timely manner.

In a statement made available to The Jakarta Post yesterday,
the agency said that further appreciation of the Japanese yen
will boost the U.S. dollar value of the country's foreign debts
this year.

"But the debt burden should continue to decline in the long
term due to strong export growth and moderate current account
deficits," the statement added.

These favorable factors will, however, be tempered by
challenges arising from the country's substantial development
needs and the transition in political leadership once President
Soeharto leaves office.

Far-reaching financial reforms have broadened Indonesia's tax
base, halving the share of energy revenues since 1988 and
reducing the budget deficit from 1.5-3.5 percent of the gross
domestic product (GDP) in 1990 to a currently negligible level.

Standard & Poor's said that recent progress in rehabilitating
state banks and the gradual privatization of a number of state
enterprises should also help keep government finances balanced
and further reduce the burden of public sector debts, estimated
at 44 percent of GDP in 1995.

At the same time, according to the agency, high rates of
savings and investment -- more than a third of GDP in 1995 --
will likely sustain healthy rates of economic growth, which
should help to narrow still sizable disparities in wealth and
income.

Soeharto is widely expected to be re-elected in 1998 but
political stability and investor confidence will be tested by his
eventual departure from office, said the agency. The continuity
provided by a technocratic leadership committed to economic
reform, it added, should support a relatively smooth political
transition when it comes.(hen)