S&P upgrades Indonesia's sovereign rating to investment grade

Rating agency Standard & Poor have upgraded Indonesia's sovereign credit outlook to BBB-, up from BB+.
Rating agency Standard & Poor have upgraded Indonesia's sovereign credit outlook to BBB-, up from BB+.PHOTO: CHINA SONANGOL LAND PTE LTD

JAKARTA (REUTERS) - Rating agency Standard & Poor's (S&P) upgraded Indonesia's sovereign bond ratings to investment grade on Friday, saying the move reflected its assessment of reduced risks to the country's fiscal position.

A rating upgrade usually means an economy can get cheaper cost of borrowing for its bonds.

S&P has upgraded Indonesia's sovereign credit outlook to BBB-, which is an investment grade, up from BB+, junk status.

South-east Asia's largest economy already obtained investment grade status from two other major rating agencies, Fitch and Moody's more than five years ago.

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On Friday, S&P said, "Indonesia's increased focus on realistic budgeting has reduced likelihood that shortfall in future revenue would widen general government deficit significantly."

S&P had previously not followed other big ratings agencies due to a host of concerns. It gave Indonesia a positive outlook in May 2015 for President Joko Widodo's bold move to remove gasoline subsidies.

In June last year, it denied Indonesia its coveted investment grade again, citing weak government revenue collection and worsening corporate credit quality.

Since then, Mr Joko has reshuffled his Cabinet and appointed respected reformist, former managing director of the World Bank, Sri Mulyani Indrawati, as his finance minister.

She then ran a tax amnesty programme that many said was the world's most successful and is currently overseeing a plan to overhaul the taxation system.