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NEWS UPDATES 30 September 2010

Indonesia set for rating upgrade

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The government will not allow a bubble to occur in the country's financial markets, and will likely receive an investment-grade credit rating early next year, Finance Minister Agus Martowardojo said on Wednesday night.

Speaking at a dinner of the Jakarta Foreign Correspondents Club, Agus said the inflows of foreign money reflected confidence in Indonesia's economy.

"We would like to send a signal, convince the world and the markets, that we won't allow any bubbles in Indonesia," he said.

Agus said the government expected to get a coveted investment-grade credit rating next year.

"I believe they will upgrade us, probably early next year," he said, referring to the three major credit-rating agencies, Moody's Investors Service, Fitch Ratings and Standard & Poor's.

Standard & Poor (S&P) raised Indonesia's sovereign credit rating to BB from BB- on March 12, with a positive outlook.

S&P and Moody's both rank Indonesia two levels below investment grade, while Fitch Ratings on January 25 raised its rating to one step below investment grade.

Agus said the government aims to lift tax collection by Rp 100 trillion ($11.17 billion) in 2011 to 12 percent of the gross domestic product.

"The target for this year is around Rp 700 trillion. So it will become Rp 800 trillion. It will be 12 percent of GDP," he said.

The government is trying to increase tax collection to improve its long-term finances as it seeks the investment-grade rating.

He said he did not want the rupiah to be overvalued, saying the appreciation of the rupiah reflected capital inflows as investors shifted away from low interest rates in the West.

Agus said the government can only provide 35 percent of the budget needed for infrastructure in the next four to five years.

Indonesia needs US$140 billion over the next five years in infrastructure development, ranging from paving roads and highways to providing more power and water supplies nationwide.

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