JAKARTA. The Government of Indonesia is lobbying Standard and Poor or S&P’s Rating Services to rise Indonesia’s credit rating to investment grade. In the side lines of the World Bank and International Monetary Fund In Washington DC, the United States of America (the US) from 4-9 October 2016.
Previously, in May 2016 President Joko Widodo had met with S&P delegates to discuss about Indonesia’s rating. However, S&P still maintained Indonesia’s rating at the level of ‘BB+’ or ‘speculative’.
Meanwhile, Fitch Rating, as well as Moody’s had bestowed investment rating to Indonesia in 2012.
During the meeting, Minister of Finance Sri Mulyani explained Indonesia’s current policies, mainly fiscal policies in 2016 and 2017. Fiscal risk becomes the main reason of S&P for not increasing Indonesia’s bond rating.
According to Sri Mulyani, S&P may increase Indonesia’s rating so long as Indonesia can improve the policy to be more effective and predictable. In this case, Indonesia may improve the budget structure to enhance domestic economic resilience in responding to external effects.
Economist at Indonesian Science Institute (LIPI) Latif Adam estimated that the fiscal risk is the weak point of Indonesia’s rating. Even though the result of tax amnesty in the first period was applauded by many groups, government may not necessarily to meet the target of IDR165 trillion by the end of 2016.
According to economist at Samuel Aset Manajemen Lana Soelistianingsih Indonesia has actually responded to S&P inquiries related to tax revenues shortfall and tax amnesty. Furthermore, Indonesia has decided to cut some budgets in order to cover revenues shortfall. Lana added that under the current fiscal condition, Indonesia has a 60% chance of increasing its rating.
However, economist at Gadjah Mada University, Yogyakarta Revrisond Baswir said that Indonesia still has a problem related to negative primary deficit. Therefore, Revrisond suggested government to launch tax reform in 2017.
(Muhammad Farid/Translator)
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