Bangkok--11 Jan--Moody's Investors
Moody's Investors Service has assigned a foreign currency rating of Ba2 with a stable outlook to Indonesia's Global Medium Term Notes (MTN) program. The notes issued under this program will carry the same rating.
"The rating is broadly supported by Indonesia's ongoing economic resilience against the global crisis and accompanying, albeit moderating, improvements in its underlying credit-metrics," says Mr. Aninda Mitra, Moody's sovereign analyst for Indonesia.
"The government's fund-raising efforts are in line with its projected gross financing requirements for 2010, and also consistent with a stable-to-declining debt trajectory," says the analyst.
"The recent moderation in headline consumer price inflation to below the central bank's targeted range of 4.5% +/- 1% and an appropriate stance in monetary policy support near-term price expectations," says Mitra, adding, "But, the postponement of power tariff adjustments could subject medium-term inflation fundamentals to greater risk."
"Political uncertainty has risen somewhat on account of the parliamentary inquiry into the appropriateness of the Bank Century bailout, and which has implicated key ministers in the recently re-elected Yudhoyono administration," says Mitra, while noting that "These risks could slow the momentum in structural reforms, but not derail the macroeconomic policy framework which had ably withstood recent elections as well as a series of large external shocks."
Recent regulatory efforts to encourage faster real credit growth were also relatively modest compared to the accommodative or loose monetary policy stance of regional and many ratings peers; and appropriate in view of the country's low inflation and comfortable liquidity position, as well as the government's modest fiscal borrowing needs.
According to Mr. Mitra the prospect of sovereign credit improvements was contingent on a greater level of foreign currency reserve adequacy against unexpected shocks.
"In addition, structural reforms which could anchor medium-term price expectations, durably improve the financial fundamentals of state-owned-enterprises, and deepen domestic capital markets would also ensure the sustainability of ongoing credit improvements," says Mitra.
The last rating action on Indonesia was taken on 16 September 2009, when Moody's upgraded the sovereign bond rating to Ba2, from Ba3.
The principal methodology used in rating the government of the Republic of Indonesia is Moody's Sovereign Bond Methodology, which can be found at www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Rating Methodologies sub-directory on Moody's website.
Singapore
Aninda S. Mitra
Vice President - Senior Analyst
Sovereign Risk Group
Moody's Singapore Pte Ltd.
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Singapore
Thomas J. Byrne
Senior Vice President - Regional Credit Officer Sovereign Risk Group Moody's Singapore Pte Ltd.
JOURNALISTS: (852) 2916-1150
SUBSCRIBERS: (65) 6398-8308