Indonesia's Debt Ranking Rises
Tuesday, 09 May, 2006 | 15:35 WIBTempo Interactive
, Jakarta: Moody's Investors Service believes Indonesia's economic performance this year is becoming better. That is why this international rating organization will raise Indonesia's foreign debt ranking next week.
According to a Moody's analyst, Steven Hess, the Indonesian government's debt ranking rises one level from Caa (almost unable to repay debt) up to B1 (high risk). “The Indonesian government's financial performance is improving,” he said as quoted by Bloomberg yesterday.
The government's debt ratio against Gross Domestic Product (GDP), for example, dropped to 47 percent last year. At the same time, the budget deficit can be pushed down from 0.9 percent to 0.5 percent. “Thanks to the cautious fiscal policies,” he said. Now the Indonesian government's debt is still US$79 billion.
Although Indonesia’s ranking is up, the B1 level is still high. This new ranking is four levels below the criteria of ‘adequate for investment.’ According to Hess, Jakarta's government must encourage direct investment so that its level can rise to more than B1.
The B1 level is the highest ranking Moody's has awarded to Indonesia since the economic crisis in 1997. Before, Standard & Poor's determined Indonesia's debt ranking at the level of B+. This ranking benefits Indonesia because the cost for seeking foreign loans is less.
The Minister of the Economy, Boediono, said the government does not close the possibility to obtain more loans on the condition the loans will be able to stimulate the economy. However, he said, the government is still trying to lessen the debt ratio against the GDP.
Padjar and Yudha Setiawan