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op international credit rating agency Standard & Poor’s upgraded Indonesia’s sovereign credit rating with a positive outlook, paving the way for another increase to investment grade.

S&P said in a statement released Friday that it raised Indonesia’s long-term foreign currency sovereign credit and debt ratings to BB+ from BB with a positive outlook.

“The positive outlook reflects the likelihood of an upgrade if inflation is tamed while balance sheet improvements continue, likely in combination with successful implementation of parts of the administration’s fiscal, administrative and structural reform agenda,” S&P credit analyst Agost Benard said in the statement.

An investment grade rating, which would reflect sound economic policies and the government’s ability to buy back bonds, would lead to more foreign funds flowing into Indonesia.

“The rating upgrade reflects continuing improvements in the government’s balance sheet and external liquidity, against a backdrop of a resilient economic performance and cautious fiscal management,” Benard said.

The S&P upgrade follows in the heels of other top international credit rating agencies raising Indonesia’s rating.

Fitch Ratings and Moody’s Investors Service have also raised Indonesia’s sovereign credit rating recently to one notch below investment grade, citing the potential of an upgrade in the near future.

Indonesian government and central bank officials expect an investment grade rating from at least one of these rating agencies this year, with Coordinating Minister of the Economy Hatta Rajasa predicting Indonesia would secure an investment grade rating in the third quarter of this year.

Finance Minister Agus Martowardojo said he was pleased the three top international rating agencies had now positioned Indonesia one notch below investment grade, saying the government remained vigilant about potential rising inflationary pressures.

“We remain vigilant of the inflation rate, which was indeed high in January to February. But since March, inflation has decreased with deflation occurring,” he said on the sidelines of the 15th annual ASEAN Finance Ministers’ Meeting in Nusa Dua, Bali.

Inflationary pressures in Indonesia peaked earlier in January, when headline inflation reached a 21-month high of 7.02 percent sparked by soaring volatile food prices, in line with a surge in global commodity prices.

Other than cooling inflationary pressures, a rating upgrade may likely happen if external debt burdens decline, the sovereign’s balance sheet is improved or if fiscal and external vulnerabilities were further reduced through reforms such as subsidy rationalization, S&P said.

The rating agency warned, however, that stalling of reforms or the absence of timely and adequate policy responses to renewed fiscal or external pressures would result in the rating stabilizing or weakening.

“Rating constraints include Indonesia’s low per capita income, structural and institutional impediments to higher economic growth and relatively high inflation.”

Citigroup expected Indonesia to be rated investment grade in the second half of this year, Johanna Chua, Citi’s head of Asia Pacific economic market analysis said.