Shiro Copr.CO.ID - SINGAPORE Moody's Ratings assigned a Baa2 rating to the unsecured senior sukuk denominated in US dollars issued by the Government of Indonesia through the Indonesian SBSN Issuer III (PPSI III). The value of the unsecured senior sukuk issuance program is US$ 45 billion, equivalent to Rp 733.5 trillion (with an exchange rate of Rp 16,300 per US dollar).
This rating applies to all issuances in various tranches. According to the available terms and conditions, this wakalah certificate is a direct, unconditional, and non-subordinated obligation of the Government of Indonesia as the issuer. "In our assessment, the payment obligations on the securities issued by PPSI III have a rating that is equivalent (pari passu) to all existing and future unsecured senior foreign debt of the issuer," explained Martin Petch, Senior Vice President, Credit Officer at Moody's Investors Services, in a release on Thursday (17/7).
Some of the sukuk issuance proceeds will be used for general financing. In addition, the government plans to use the net proceeds from the planned green tranche to finance or refinance expenditures directly related to "Sustainable Development Goals (SDG) Spending that is Green and Blue-focused" as defined in the government's SDG framework.
This rating reflects the long-term issuer rating of the Government of Indonesia, which is currently at Baa2 with a stable outlook. "We note that the rating we have assigned to the sukuk does not reflect our view on the compliance of the issuance structure with Sharia law," explained Petch in the release.
Moody's also stated that Indonesia's Baa2 rating is supported by economic resilience and structural factors such as abundant natural resources and a strong demographic profile, as well as stable and solid GDP growth. This rating is further reinforced by careful fiscal and monetary policies, focusing on budgetary discipline, policy continuity, and macroeconomic stability. As a major exporter of coal, fossil fuels, and palm oil, Indonesia still faces carbon transition risks.
"We expect Indonesia's real GDP growth to average around 4.7% in 2025 and 2026, reflecting stable domestic consumption but shadowed by investment uncertainty," said Petch. Global commodity price volatility and U.S. tariffs add to the negative risks, exacerbated by the slow absorption of the government budget in the first half of this year, which prompted the launch of an economic stimulus package in June 2025.
"we project the government's debt burden will remain stable around 40% of GDP, lower compared to comparable countries," said Petch. However, the Baa2 rating also takes into account weaknesses in Indonesia's overall fiscal indicators. Specifically, the government's ability to afford debt is burdened by a low revenue base, which can also be affected by the cancellation of the early this year's VAT rate increase and the possible transfer of state-owned enterprises' dividends to the new state wealth fund, Danantara.
"We assume fiscal discipline will remain intact, as reflected in the government's commitment to keep the deficit below 3% of GDP, which supports the stabilization of the debt burden at current levels, although there is uncertainty about the effectiveness of the current and future administrations in increasing state revenues," said Moody's.
Although Indonesia's foreign currency government debt is quite large, about 28% of the total, Indonesia is more vulnerable to exchange rate fluctuations compared to comparable countries. However, the increase in foreign exchange reserves, expansion of policy instruments, and deepening of the domestic bond market have reduced external vulnerability and decreased the proportion of foreign currency debt since 2020.
Stable prospects reflect a balance between upward and downward risks. Upward risks come from ongoing efforts to expand the scale and competitiveness of the manufacturing sector, which could drive higher and more sustainable GDP growth toward income levels higher than current assumptions.
"Conversely, the risks of decline include potential policy uncertainties due to political transitions, which can weaken growth performance due to reduced foreign investment and negative impacts on fiscal indicators. Moreover, the lack of tax base expansion can reduce the government's fiscal space for policies and to address economic shocks," Moody's opinion
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