Wednesday July 26, 2:16 PM
Standard and Poor's upgrades Indonesia ratings

International ratings agency Standard and Poor's raised Indonesia's long-term foreign and local currency ratings on the country's improving fiscal and external performance.

SP raised Indonesia's long-term foreign currency to "BB-" from "B+" and the long-term local currency rating to "BB+" from "BB", while the short-term rating of "B" was affirmed and the outlook on the long-term rating was stable.

It said the upgrades reflect Indonesia's improving fiscal and external performance resulting in declining debt burdens.

SP said small but persistent government surpluses and a falling interest rate burden coupled with the rupiah's appreciation could lower government debt to under 50 percent of gross domestic product (GDP) this year.

That compares to more than 100 percent in 2000.

It said the government continued to prudently manage its fiscal position and although the budget deficit target for 2006 has been upwardly revised, the country's progress toward a balanced budget remained on track.

Similarly, current account surpluses in conjunction with recent foreign direct investment inflows have halved the net external debt to an estimated 94 percent of current account receipts in 2006, the ratings agency said.

Supporting these positive trends is an improvement in Indonesia's political environment and wider reforms, it added.

"While implementation remains a challenge, an encouraging development has been the speed at which difficult but much-needed reforms have been undertaken," said SP credit analyst Sani Hamid.
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