Indonesia regains investment grade status (by IFN)

INDONESIA: The writing has been on the wall for much of this year and on the 16th December, Indonesia put its money where its mouth is by regaining investment grade status for its sovereign debt, after 14 years of being labeled as junk.
In clearly what is a coup for the country still weighed down by allegations of corruption and an inefficient business landscape, Fitch upgraded Indonesia's long-term foreign and local currency debt ratings to 'BBB-' from 'BB+'. The outlook on both ratings is stable.

With its investment grade rating affording it a wider investor base and lower borrowing costs, any sovereign issuance from Indonesia also has the luxury of being more attractive than European debt - an irony certainly not lost on a country grouped among Southeast Asian nations once vilified by the west amid the 1997/98 Asian financial crisis.

"The upgrades reflect the country's strong and resilient economic growth, low and declining public-debt ratios, strengthened external liquidity and a prudent overall macro policy framework," said Philip McNicholas, a director of Fitch's Asia Pacific sovereign ratings group.

Optimism on the country's investment standing has been driven by its booming economy which remained unscathed by the 2009 global downturn and has reportedly grown more than 6% this year.

Agus Martowardojo, its finance minister, said that the improved credit rating has opened a window for it to refinance high-cost debt at lower rates. The government is also said to be planning the issuance of global Sukuk and US-dollar denominated conventional bonds next year.

However, Fitch noted that weaknesses still remain in the Indonesian system, including corruption and weak infrastructure, with Susilo Bambang Yudhoyono, the country's president, pledging to guard reforms to maintain its economic growth and sustain its return to grace.

SEE IFN NEWS.