"The upgrade given in the midst of the current global economic downturn shows the risk of investment is smaller to attract more capital inflows," Bank Indonesia Deputy Governor Hartadi A Sarwono said.
Jakarta (ANTARA News) - International rating agency Fitch raised Indonesia`s debt rating from "BB" to "BBB-" on Thursday categorizing the country as investment grade which is good for long-term investment.

Bank Indonesia Deputy Governor Hartadi A Sarwono said when contacted about the development here on Thursday that the new rating would have a big effect on the country`s economy.

"We welcome it. It has long been awaited in line with various efforts that have been taken consistently and carefully," he said.

He said with the upgrading the prospects of Indonesia`s economy would be better in line with the decline of risks and borrowing costs that would support financing of economic activities in the country.

"The upgrade given in the midst of the current global economic downturn shows the risk of investment is smaller to attract more capital inflows," he said.

Economic observer Mirza Adityaswara said that investors had expected it in line with the country`s improving economic stability.

"The yield of Indonesia`s state debentures (SUN) already reflects an investment grade rating as the yield of the SUN in rupiah for a 10-year period is only 6.2 percent or lower than the average rate in European countries where the rating is still A," he said.

The investment grade reflects Indonesia`s capability in managing macro-economic risks prudently especially with the government`s debt ratio at only 25 percent of the GDP and a fiscal deficit of only 1.5 percent of GDP with economic growth standing quite high at 6.5 percent and the inflation rate quite low at 4.0 percent this year.

The impact of the rising rating, Mirza said, would be that long-term portfolio investment funds would be entering the country including foreign direct investments.

"Certainly for the foreign direct investment we have to provide its infrastructure," he said.

He said Indonesia must strive to make the investment rating to continue to improve to become "BBB" and then "BBB+" and then "A-" and so on by maintaining the prudent macro-economic ratios namely the ratio of the government debts, the ratio of private debts, the ratio of fiscal deficit, the ratio of balance of payments, prudent banking and increasing corruption eradication efforts and economic growth to improve the tax ratio. (*)

Editor: Heru Purwanto
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