Comprehensive tax and customs reforms coupled with the rationalization of fiscal perks given away to investors will lead to fresh credit rating upgrades in the near-term, according to the Department of Finance (DOF).
Finance Secretary Cesar V. Purisima said, however, that last week’s move by debt watcher Moody’s to upgrade the Philippines’ credit rating to Baa2 from Baa3 was “still a notch underrated.”
Nonetheless, Purisima attributed the latest credit upgrade to the Aquino administration’s “good governance reforms.”
“We welcome news of yet another credit ratings upgrade as a recognition of the robust foundations we built through good governance reforms and prudent fiscal management. Four years down this road, we are growing ever firmer in our conviction that good governance is indeed good economics: This is the 21st positive credit rating action that the country has earned since the Aquino administration took office in 2010,” Purisima said in a statement.
The Finance chief attributed the latest upgrade to the following strides made in the fiscal space: A higher tax-to-gross domestic product (GDP) ratio at 14.08 percent as of end-September; a 12.6-percent jump in revenue collection at end-October; and a lower debt-to-GDP ratio of 37.3 percent at the end of the first half.
“Notably, the credit rating upgrade affirms the positive effects of the President’s daring program to reform the Bureau of Customs. The BOC is fast-becoming one of the country’s best reform stories: From January to October 2014, collections grew 18.8 percent compared to the same period last year,” Purisima noted.
“These efforts have built strong economic fundamentals with which we will continue to fuel our positive growth trajectory. Improving revenue collection and lowering debt service have increased fiscal space to fund critical investments for our people. In just four years, good governance has freed up fiscal space to allow us to almost double our education and public works budgets, to triple our health budget, and quintuple our social welfare budget,” he said.
According to Purisima, the government wants to put in place the following reform agenda to further improve the country’s credit ratings before President Aquino’s term ends in 2016: Comprehensive and equitable tax reform to align the tax structure with those in other Asean countries; enhancements in tax administration; expansion of the Treasury Single Account; and passage of priority initiatives pending in Congress, including customs modernization as well as rationalization of fiscal incentives.
“We are fully convinced that continuing our economic turnaround story rests on our commitment to good governance. We take this upgrade as a reminder to government and civil society that sustaining good governance reforms is the only way to maintain and capitalize on our ever improving trajectory,” Purisima said.