t took exactly 20 years for Indonesia — since the 1997 Asian financial crisis — to fully regain its investment grade status, as Standard and Poor’s (S&P) followed on Friday two other global rating agencies in awarding such an influential rating to the country.
S&P Global Ratings lifted Indonesia’s sovereign rating to BBB- from BB+ with stable outlook, based on assessments of the country’s improved budget and the economic and financial policy settings that had become “more predictable.”
“The government’s new focus on realistic budgeting has lowered the risk that budget deficits will widen significantly when government revenue disappoints,” the agency wrote in its statement.
S&P saw that the country had created effective policy-making in recent years to promote sustainable public finances and balanced economic growth, amid structural challenges in generating tax revenue.
The recently concluded tax amnesty was seen as being a help to future tax collection. However, the ratings agency advised the government to increase control over fiscal spending by extending subsidy reform to electricity.
Finance Minister Sri Mulyani Indrawati said she was pleased with S&P’s announcement, as the government was considered realistic and credible in managing the state budget, while confidence had grown amid reform in the country’s tax system.
“This will have a positive impact on investor perception, as we need more investment,” she said at a press conference on Friday, adding that the central government’s financial performance had been positively appraised by the Supreme Audit Agency (BPK).
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