Bangkok--10 Nov--Standard & Poor's
Standard & Poor's Ratings Services said today it has affirmed its 'BB-' long-term foreign currency sovereign credit rating and 'BB+' long-term local currency rating on the Republic of Indonesia. The outlook remains stable. The 'B' short-term sovereign credit rating and all senior unsecured debt ratings on Indonesia have also been affirmed.
The stable outlook reflects Standard & Poor's view that debt reduction in recent years and an improved policy environment, particularly the flexible exchange rate regime, will enable the government to sustain an adequate external liquidity cushion in the face of ongoing negative external shocks.
"Indonesia is facing elevated vulnerability to the unfolding global financial crisis, given its still relatively high external debt," said Standard & Poor's credit analyst Agost Benard. There is potential for portfolio equity to become a net outflow, thus triggering sudden and adverse exchange rate movements, in turn putting pressure on debt service capacity and fiscal balances. In the current environment, that would also exacerbate domestic liquidity pressures, Mr. Benard said.
However, despite a 15% decline in foreign reserves since its July peak due to foreign portfolio outflows and central bank support of the currency, the current reserve cushion at US$51 billion is adequate to cover short-term debt and amortization about 1.1x. This buffer may be boosted by securing access to additional foreign currency liquidity, most notably through a swap facility with Asian central banks worth US$12 billion. Any sudden deterioration in confidence, heightened capital outflows, and loss of reserves could put pressure on credit quality.
The outlook and the ratings could come under downward pressure if external shocks intensify and the government is unable to counter these shocks with adequate and timely policy measures.
Complete ratings information is available to subscribers of RatingsDirect, the real-time Web-based source for Standard & Poor's credit ratings, research, and risk analysis, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; select your preferred country or region, then Ratings in the left navigation bar, followed by Credit Ratings Search.
Media Contact:
David Wargin, New York (1) 212-438-1579, [email protected]
Analyst Contacts:
Agost Benard, Singapore (65) 6239-6347
Elena Okorotchenko, Singapore (65) 6239-6375
Key Contacts:
Americas Media Relations: (1) 212-438-6667
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