Fitch rates Indonesia's proposed Sukuk BBB-

JAKARTA. Fitch Ratings has assigned Indonesia's proposed Perusahaan Penerbit SBSN Indonesia III (PPSI-III) global certificates (sukuk) a “BBB-(EXP)” rating.

“The expected rating is in line with the Republic of Indonesia's Long-Term Foreign Currency Issuer Default Rating (LT FCIDR) of 'BBB-', which has a stable outlook. The final rating is conditional on receipt of information conforming to materials already received,” Fitch said in an official release.

The rating reflects Fitch's view that cash flow supporting payment on the proposed sukuk will constitute direct, unconditional, unsecured and general obligations of Indonesia, ranking equally with the country’s unsecured and unsubordinated marketable external debt.

“Indonesia's ratings are underpinned by its strong economic growth, supported by high investment and savings rates, and low and declining public debt ratios,” Fitch said.

“Pressures on the external finances, a credit weakness, have resulted in some strain on the credit profile, but these are not yet seen as inconsistent with a 'BBB-' rating. The ratings incorporate Fitch's expectation that policy will be managed in such a way as to prevent economic overheating,”

Progress in tackling structural weaknesses, including low average incomes and deficiencies in infrastructure, combined with sustained economic growth, without a build-up of external imbalances or a severe inflation shock, would be positive for the ratings over the medium-term, according to Fitch.

“Further reform of public finances, leading to enhanced budgetary flexibility, would also be positive for the ratings,” Fitch said.