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.