Moody's to Assign Ba1 Rating to Upcoming Indonesian Global Bond

(Source: Info-Prod Research (Middle East))Moody's Investors Service will assign a Ba1 rating with a stable outlook to the upcoming global bond issuance of the Government of Indonesia, which is a drawdown from the existing $9 billion Global Medium-Term Note (GMTN) program. The proposed rating is subject to receipt of final documentation, the terms and conditions of which are not expected to change significantly from the draft documents reviewed by Moody's. The sovereign rating is principally supported by Indonesia's large size and middle-income economy which has been resilient against the global recession and is showing increasing dynamism. Year-on-year GDP growth is expected to remain strong at 6- 6.5% this year, and ongoing improvements in growth prospects are not accompanied by external imbalances or unmanageably large inflation pressures. Despite shortcomings in governance and infrastructure, an appropriately flexible policy framework has ensured macroeconomic stability amidst large external shocks. Government finances have been ably managed, with fiscal deficits contained within 2% of GDP. Alongside nominal and real appreciation of the exchange rate, relatively well managed fiscal fundamentals and debt management operations lowered the government debt burden to 26% of GDP at the end of 2010. Foreign currency reserve adequacy has improved notably in recent months, with Bank Indonesia's foreign currency holdings crossing $100 billion earlier this year, and providing more than 6 months of import cover and greater than 2X coverage of maturing short-term external debt. These improvements are backed by Indonesia's sizable current account surpluses and a pickup in foreign direct investment. Portfolio investment inflows, some of which may be reversible, have also played a notable role. The stable outlook balances the prospects for further gradual improvements in sovereign credit metrics against several uncertainties, which include: (1) ongoing shifts in the financial system supervisory framework; (2) finalization of the proposed "government bond stabilization framework," amidst shallow onshore capital markets which has resulted in a relatively large share of non-resident financing of government deficits; and (3) the pending land acquisition bill which could potentially reduce impediments to faster infrastructure development, and sustain greater foreign direct investment inflows. Please see ratings tab on the issuer/ entity page on Moodys.com for the last rating action and the rating history.

Originally published by Info-Prod Strategic Business Information.

(c) 2011 Info-Prod Research (Middle East). Provided by ProQuest LLC. All rights Reserved.

A service of YellowBrix, Inc.