Indonesia expects to reach investment grade within one year, Finance Minister Sri Mulyani Indrawati said, citing the healthy state budget and strong economic fundamentals.
“There is no signal we are going to depart from this path ... I am still quite optimistic [it can be reached in] one or two years. I am expecting in less than one year,” she told foreign media on Tuesday night.
Mulyani, known for reforming the Finance Ministry, said to reach investment grade would depend on the performance of top ministry officials.
Indonesia, Southeast Asia’s largest economy, is rated below investment grade by ratings agencies.
Fitch Ratings on Jan. 25 upgraded Indonesia’s long-term foreign and local currency ratings to BB+ from BB, one level below investment grade, citing the country’s resilience amid the global financial crisis.
Moody’s Investors Service on Jan. 21 maintained its Ba2 rating for Indonesia, while Standard & Poor’s S&P raised the outlook on its BB- rating for the country to BB+ on Oct. 23. S&P’s rating is three levels below investment grade, while Moody’s is two levels below investment grade.
Indonesia’s economy grew by 4.5 percent in 2009 despite the global economic downturn, the Central Statistics Agency said.
The Finance Ministry expects the economy to expand 5.5 percent this year, as stated in the revised 2010 state budget.
Mulyani said she continues to provide ratings agencies with updates on economic policies.
Investment Coordinating Board (BKPM) head Gita Wirjawan said earlier it would not take long for Indonesia would reach investment grade. He shared Mulyani’s opinion, that the government should update ratings agencies and foreign stakeholders on the economic outlook.
Anggito Abimanyu, head of the Fiscal Policy Office at the ministry, said the hurdles to reach investment grade included the current poor investment climate, the improved coordination of central and local governments and the risks related to state-run enterprises.
“[To improve our investment climate] we try to provide more tax incentives and to debottleneck infrastructure problems, because Indonesia is considered to be lagging behind in these areas,” he said.
Analysts said the government should deal with negative factors hampering investment, like legal uncertainties and poor infrastructure.
They also said the unresolved Bank Century case might hurt investment. The House of Representatives voted by 325 to 212 votes on March 3 that the Century bailout involved legal violations, whilst putting the blame on Mulyani for making the policy decision.
But on Tuesday night Mulyani simply responded: “Indonesia is always noisy, always messy; but in the end, policy will always prevail.”