The JaJakarta. Indonesia remains hopeful in obtaining the elusive investment-grade rating from Standard & Poor’s Financial Services on the back of a more realistic budget and the much-lauded tax amnesty program, a minister said on Wednesday (12/10).
S&P is the only major debt rating agency that rates Indonesia’s sovereign bonds at one level below investment grade. The other rating agencies have maintained investment-grade ratings for the country’s sovereign credit for more than five years.
Finance Minister Sri Mulyani Indrawati, along with representatives from Bank Indonesia and the Financial Services Authority (OJK), met rating agencies Standard & Poor’s, Moody’s Investors Service and Fitch Ratings on the side of the International Monetary Fund and World Bank Group annual meeting last week.
“The meeting is very important to give the update on the development of the Indonesia’s economy,” Sri Mulyani said, just hours after she landed in Jakarta following her week-long Washington DC trip.
“Especially for Standard & Poor’s who has yet to provide an upgrade for Indonesia, this meeting becomes very critical because this is their turning point to [change] Indonesia’s investment rating,” Sri Mulyani said.
At the meeting, she explained to the rating agency that the Rp 137.6 trillion ($10.5 billion) spending cut from this year’s budget and additional revenue from the tax amnesty program would keep deficit in check and maintain the country’s fiscal credibility.
S&P affirmed its BB+ long-term and B short-term sovereign credit ratings in Indonesia in June which prevents the country from attracting the much-needed long-term investment funds to help finance the state budget and trade deficit.
At the time, S&P said the ratings on Indonesia “balance the country’s low per-capita income, middling fiscal and external indicators against improved policy and institutional settings, credible monetary policy, and buoyant economic growth.”