S&P upgrades RI credit rating to CCC+

S&P upgrades RI credit rating to CCC+

The Jakarta Post, Jakarta

International rating agency Standard & Poor's raised on
Thursday its long-term foreign currency sovereign credit rating
on Indonesia to CCC+ from selective default and assigned the
rating a stable outlook.

S&P said the upgrade followed the completion of the
rescheduling of commercial loans owed to private creditors
grouped under the London Club.

In April, S&P downgraded the country's long-term foreign
currency rating to selective default from CCC previously
following a rescheduling agreement reached with the Paris Club of
creditor nations over some US$5.4 billion in sovereign debts
maturing this year and 2003.

S&P argued at the time that Indonesia was technically in
default until private creditors under the London Club also agreed
to the terms of the Paris Club deal.

The Paris Club required Indonesia to also seek the same
treatment from the private creditors under a comparability
ruling.

Anton Gunawan, an economist at Citibank, said that the rating
upgrade would not necessarily lower the borrowing cost for
investing in Indonesia because of various uncertainties still
plaguing the country.

"At CCC+, the borrowing cost is still high," Anton told The
Jakarta Post.

He urged the government to continue showing commitment to the
reform program to improve the situation.

He added that the upgrade had been widely expected, and
Citibank had actually expected the rating to be raised to B-.

"But S&P is still worried about (fiscal) problem in 2004," he
said.

S&P said that the government would have to seek another debt
rescheduling facility from the Paris Club for debts maturing in
2004, a move which would put Indonesia in default status again
until it obtained similar deal from London Club.

"Notwithstanding Indonesia's high level of international
reserves of nearly $30 billion, S&P expects the government to
seek its fourth Paris Club agreement late next year," the rating
agency said.

Meanwhile, the Jakarta stock index ended Thursday 1.6 percent
higher at 427.119, but dealers said that this was mainly due to
technical rebound in selective blue-chip firms.

The rupiah remained stable at Rp 8,865 per U.S. dollar.