Bangkok--13 Jan--Standard & Poor's
Standard & Poor's Ratings Services today assigned its 'BB-' senior unsecured long-term foreign currency debt rating to the benchmark size senior U.S. dollar global unsecured bond to be issued by the Republic of Indonesia (foreign currency BB-/Positive/B; local currency BB+/Positive/B; ASEAN scale axBBB+/axA-2) with a maturity of 10 years. The bond constitutes part of the country's US$9 billion global medium-term notes program.
The sovereign credit ratings on Indonesia are supported by improving public-debt ratios and the accumulation of foreign reserves. We estimate the net central government debt to have fallen to 31% of GDP in 2009; foreign reserves reached a record high of US$66 billion at the end of the year, sufficient for about four months of current account payments.
The ratings on Indonesia, however, continue to be constrained by the country's still high external leverage with net external debt at an estimated 51% of current account receipts in 2009.
In addition, numerous microeconomic distortions prevail that constrain growth prospects and the sovereign's creditworthiness. The ratings are also constrained by the time lags and unavailability of consolidated regional and local government budgetary performance, which hampers the accurate analysis of the public sector.
The positive outlook on the sovereign rating reflects Standard & Poor's expectation that a stronger political environment will yield a more effective policy setting to address structural problems, while debt reduction and underlying fiscal prudence will remain key elements of macroeconomic policy. The ratings could be raised if fundamental reforms are implemented such that fiscal and external vulnerabilities are reduced, for example, the reform of fuel and energy subsidies. Conversely, a stalling of reforms, or the absence of timely policy response in the event of renewed fiscal or external pressures, could put downward pressure on the ratings.
Complete ratings information is available to RatingsDirect on the Global Credit Portal subscribers at www.globalcreditportal.com and RatingsDirect subscribers 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. Use the Ratings search box located in the left column.
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