Moody's rates Indonesia bonds Baa3

Moody's Investors Service said it assigned a provisional Baa3 rating to the bonds that Indonesia plans to issue under its recently enlarged dollar-denominated global medium-term note program. The outlook is stable.

The agency said Indonesia's Baa3 government bond rating is supported by healthy economic prospects, structurally narrow fiscal deficits and low public debt. In Moody's view, the country's very large scale and ample natural resource endowment also buttress the rating.

According to the agency, credit challenges include a relatively shallow and volatile domestic capital market, which contributes to Indonesia's reliance on external funding as manifested in the fairly large proportion of government securities held by non-residents, and the Indonesian non-financial corporate sector has increased its foreign-currency debt since 2010, increasing the country's cross-border debt servicing requirements accordingly.

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