Jakarta – Standard and Poor's said Tuesday it had downgraded Indonesia's long-term foreign currency issuer credit rating to "selective default" from CCC+ in the wake of last week's debt rescheduling by Paris Club donor countries. The global ratings agency in a statement issued in London and received here said it had also downgraded the country's short-term foreign currency issuer credit rating to "selective default" from C.

"The downgrades reflect the fact that Indonesia is now effectively in default on 850 million dollars of foreign currency commercial bank loans," it said in the statement.

The ratings on the 850 million dollars of loans were lowered to "default" from CCC+ and its senior unsecured debt ratings on 1.43 billion dollars of other foreign currency loans and bonds were affirmed at CCC+.

The agency also affirmed Indonesia's long-term and short-term local currency issuer credit and senior unsecured debt ratings at B- and C respectively, affecting local currency bank- recapitalisation bonds, with a face value of 320 billion rupiah (42 billion dollars).

"All ratings have been removed from CreditWatch with negative implications, where they were placed on September 13, and the outlook on the long-term local currency issuer credit rating is stable," the statement said.

The rescheduling had strenthened Indonesia's external financing and effectively cut out the risk of annual reschedulings, S and P added. "The loans, partially amortising before end-March 2002, will be restructured on terms that are disadvantageous to creditors, reflecting Indonesia's commitment to seek similar magnitudes of debt relief from private lenders as that secured from the Paris Club of 19 bilateral creditor governments on Friday," the agency said.

"The Paris Club, by agreeing to a generous rescheduling of about 5.8 billion dollars of principal on bilateral debt coming due between April 1, 2000, and March 31, 2002, has strengthened Indonesia's external finances and eliminated the "hitherto significant" risk that sovereign debt restructurings would recur annually.

The statement said that it was significant that neither Indonesia's 26 million dollar floating-rate note (FRN) nor its benchmark 400 million dollar Yankee bond have been pushed into default.