Indonesia’s debt is well on track to achieve an investment grade in line with the continued improvement of the country’s economic fundamentals, a senior Bank Indonesia official has said.
Perry Warjiyo, the central bank’s director of monetary policy research, said the world’s major
rating agencies had continued to positively rate Indonesia’s economic performance.
Perry said that based on the statements made by several rating agencies during a recent meeting, “we are optimistic that we will get the rating upgrade to investment grade next year”.
He added that in the meetings, the central bank convinced the agencies that the country’s macroeconomy was stable and that the debt-to-GDP (growth domestic product) ratio was lowering.
In the 2011 state budget recently approved by the House of Representatives, the debt ratio against the GDP was set at 26 percent, or lower than this year’s 27.4 percent.
In 2009, the ratio stood at 30 percent and it reached 54 percent in 2004.
Indonesia’s economy has grown in the 4-6 percent range in recent years and is expected to expand by 6.3 percent in 2011.
The government has also forecast the economy to grow up to 7.7 percent by the end of President
Susilo Bambang Yudhoyono’s tenure in 2014.
The world’s three major rating agencies — Moody’s Investors Services, Standard & Poor’s (S&P) and Fitch Ratings — have upgraded Indonesia’s sovereign debt rating this year to one and two notches below investment grade.
“Rating agencies continue to upgrade their ratings and they all have given positive outlook,” Perry told reporters in Jakarta on Friday.
In January, Fitch upgraded Indonesia’s long-term foreign and local-currency credit ratings to BB+ with stable outlook, or one level below investment grade — the highest since the 1997 Asian financial crisis.
In March, two months after the Fitch upgrade, S&P raised Indonesia’s sovereign debt rating to the highest level in 12 years to BB with positive outlook, or two levels below investment grade.
“Investment grade” is awarded when government bonds are considered stable enough for banks to invest in.
In June of this year, Moody’s raised Indonesia’s credit rating to “positive” from the previous “stable” after upgrading the country’s debt rating to two levels below investment grade in September 2009.
Perry added that from the meetings the central bank went through with rating agencies, it was noted that the country’s investment climate needed a boost.
“Infrastructure and legal uncertainties are also keys to the success of obtaining investment grade.”
The central bank, Perry added, has told the agencies that “we are doing all that we can do but we need time to solve the problems”.
“Other indicators are far better than other countries with investment grade. So our issues should not hamper the rating upgrade.
Japan Credit Rating Agency was the first to raise Indonesia’s sovereign debt rating to investment grade when in July, it upgraded the country’s foreign currency rating by a notch to BBB-.
The Japanese rating agency said the country could “sustain modest economic growth while maintaining macroeconomic stability and fiscal soundness in the years to come”.
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