Indonesia will ensure risks are managed after Moody's ratings outlook cut

[JAKARTA] Indonesia’s government will ensure all potential risks are managed during an economic transformation to lift growth, its finance ministry said on Thursday (Feb 5) after Moody’s cut the ratings outlook to negative from stable.

 Indonesia’s chief economic minister said rating agencies and the global market do not understand the country’s reforms.

Airlangga Hartarto, Indonesia’s chief economic minister said Indonesia would need to explain programmes of the government and the sovereign wealth fund Danantara Indonesia to Moody’s.

Moody’s cut Indonesia’s credit rating outlook to negative, citing reduced predictability in policymaking days after MSCI flagged transparency issues that triggered a market rout of more than US$80 billion.

Moody’s said the shift to a negative outlook from stable reflected risks to policy effectiveness and signs of weakening governance.

“If sustained, the trend could erode Indonesia’s long-established policy credibility, which has supported solid economic growth and macroeconomic, fiscal and financial stability,” the ratings agency said.

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A slew of Indonesian officials had resigned last week after MSCI warned two days earlier that concerns over ownership and trading transparency in Indonesian stocks could prompt a downgrade to “frontier” status if the issues were not resolved by May.

Indonesia has since promised capital market governance reforms and several measures to address MSCI’s concerns. REUTERS