Poverty, not credit rating, is gov’t priority

For the Duterte administration, credit ratings would take a backseat to increased spending on programs under its centerpiece 10-point socioeconomic agenda aimed at slashing poverty incidence, Finance Secretary Carlos G. Dominguez III said.

In a statement Thursday, the Department of Finance quoted Dominguez as telling foreign debt watchers that “President Duterte’s electoral mandate was to make all Filipinos feel the benefits of sustained high growth, hence his 10-point agenda  meant to accelerate spending on pro-poor and growth-friendly programs to sustain the economy’s upward trajectory and ensure inclusive growth.”

Through the 10-point agenda, the government seeks to reduce poverty incidence in the country to 17 percent by 2022 from 26 percent at present.

“Our people expect this. Our government fully intends to meet that expectation. We do not plan on failing the poorest of the poor,” added Dominguez during a meeting with credit-ratings agencies on the sidelines of the joint World Bank and International Monetary Fund’s annual fall meetings in Washington D.C.

The Duterte administration would not be obsessed to seek credit rating upgrades, according to Dominguez.

“While we greatly value a ratings upgrade to full investment grade, recognizing the hard work we have put to achieve fiscal consolidation, this is only of secondary importance.  In the economic plans we lay down, rapidly reducing poverty rates ranks first priority,” Dominguez said.

The Philippines already enjoys investment grade status from the top three debt watchers—Fitch Ratings, Moody’s Investors Service as well as Standard and Poor’s—although the country remained just a notch above investment grade.

Last month, S&P Global Ratings said “a higher rating is unlikely over our two-year ratings horizon” for the Philippines due to “rising uncertainties surrounding the stability, predictability and accountability of its new government.”

Credit ratings are a measure of a government’s credit worthiness. As the stability of state finances is also related to a country’s performance, credit scores serve as a proxy grade for the economy.

Also, improved ratings would allow the government to demand lower rates when it borrows from foreign lenders, which could translate to lower interest rates for Filipino consumers and businesses borrowing from banks using government-issued debt paper as benchmarks for their borrowings.