President Joko Widodo. Courtesy of the Presidential Office.

Singapore — Moody’s Investors Service, (“Moody’s”) has today assigned a provisional foreign currency senior unsecured programme rating of (P)Baa2 to the new shelf programme by the Government of Indonesia.

The shelf programme was filed with the Securities and Exchange Commission
(SEC) in the U.S. under a shelf registration process and the overall amount of the new securities that can be issued under the shelf is USD10 billion.

The rating mirrors the Government of Indonesia’s long-term issuer rating of Baa2 with stable outlook.

Concurrently, Moody’s also assigned a Baa2 rating to the planned USD and
EUR-denominated drawdowns under the programme, with maturities of 10 and 7 years, respectively. These ratings are based on the terms and conditions disclosed on 17th April 2018.


According to the base prospectus available to Moody’s at the time of the
rating committee, the notes to be issued under the new Shelf programme
will constitute direct, unconditional and unsecured obligations of the Government of Indonesia (the issuer), and will rank pari passu among themselves and at least pari passu in right of payment with all other present and future unsecured obligations of the government.

The proceeds of the notes to be issued under the programme are intended for general financing purposes or general budgetary purposes.

Indonesia’s Baa2 rating is underpinned by policy emphasis on macroeconomic stability that increases its resilience to shocks. The sovereign’s credit profile is supported by narrow fiscal deficits and low government debt ratios.

The large size of its economy and healthy and stable growth prospects act as credit supports. Credit challenges include low revenue mobilization, and a reliance on external funding.

The stable outlook reflects balanced risks at Baa2. The stable outlook incorporates downside risks from political challenges to the implementation of further broad economic, fiscal and regulatory reforms.

While we expect effective reforms to proceed relatively slowly, further delays or reversals compared with our expectations could happen, especially – although not only – ahead of next year’s elections, when reforms involve increasing competition with a negative impact on incumbents.

The stable outlook also takes into account upside risks from a potential
improvement in competitiveness as a result of effective announced and
planned reforms.

The present administration has passed various policy packages targeted
primarily at improving the environment for investment. The effectiveness
of these policies in improving the attractiveness of Indonesia as a place
to invest has yet to become clear. Policy-makers’ perseverance in this
direction is key to ensuring that GDP growth moves towards the country’s
potential levels.


The stable outlook on Indonesia’s issuer rating indicates that rating changes are unlikely in the foreseeable future. Over time, indications that fiscal policy measures can durably and significantly raise government revenue would put upward pressure on the rating.

Higher revenue would enhance fiscal flexibility and provide more direct financial means for the government to address large social and physical infrastructure spending needs. An upgrade would also potentially result from materially stronger growth potential, commensurate with the country’s population growth and income levels, including through a deepening of financial markets and improved competitiveness.

Downward pressure would arise if:

1) evidence built up that the strengthening of Indonesia’s policy framework and institutions is on hold or reversing;

2) Moody’s concluded that the prospects of some broadening of the revenue base over the medium term are very limited, indicating limitations to policy effectiveness and posing continued constraints to economic growth; and/or

(3) SOEs’ financial strength materially worsened pointing to a rising likelihood of crystallization of material contingent  liabilities on the government’s balance sheet.

GDP per capita (PPP basis, US$): 11,717 (2016 Actual) (also known as Per
Capita Income)

Real GDP growth (% change): 5% (2016 Actual) (also known as GDP Growth)

Inflation Rate (CPI, % change Dec/Dec): 3% (2016 Actual)

Gen. Gov. Financial Balance/GDP: -2.5% (2016 Actual) (also known as
Fiscal Balance)

Current Account Balance/GDP: -1.8% (2016 Actual) (also known as External

External debt/GDP: 34.3% (2016 Actual)

Level of economic development: High level of economic resilience

Default history: No default events (on bonds or loans) have been recorded
since 1983

On 17 April 2018, a rating committee was called to discuss assigning a
provisional rating to the new Shelf programme of the Government of
Indonesia. The committee also discussed assigning definitive ratings to
the two planned drawdowns.

The main points raised during the discussion were: The terms and conditions of the notes to be issued under the shelf programme and the conclusion that these notes would rank pari passu with other senior unsecured debt obligations of the Government of Indonesia.