Marcos admin aims for ‘A’ level investment grade rating
MANILA -Despite the continuing rise of the national government’s debt stock, the Marcos administration is gunning for an “A” level investment grade rating from at least one of the three major global credit rating agencies before the end of its term in June 2028, according to Finance Secretary Benjamin Diokno.
Diokno said in a press briefing that the Marcos economic team has engaged visiting missions from Fitch Ratings and Moody’s Investor Service and has met with representatives of S&P Global Ratings during one of their recent sorties in Washington DC.
He said the top three credit watchdogs — all based in New York City — “are bullish” about the Philippines. “They have no fear about us not meeting our borrowing obligations.”
The finance chief noted that Fitch Ratings even upgraded last May its outlook on the Philippines’ “BBB” rating — bottom notch of investment-grade ratings — to “stable” from “negative.”
Still, Diokno said Fitch was the most conservative among the three, giving the Philippines the lowest rating as a sovereign long-term borrower.
In Fitch’s rating scale, BBB is between minimum investment grade of “BB” and minimum A-level of “A” rating.
Moody’s rates the Philippines at “Baa2,” which is one notch above the minimum investment grade of Baa3 in its rating scale. Baa2 is also two notches away from the A-level bottom rung of “A.”
Also, S&P Global rates the Philippines at BBB, which is two notches above the minimum investment grade and a notch away from A-level ratings band.
“The are updating every two years which is rather slow, but our goal is to get an ‘A’ rating from at least one of the three majors before the President’s term ends,” Diokno said.
“But we do already have an ‘A’ rating from the Japan Credit Ratings Agency (JCRA), and even a (top-of-the-scale) ‘AAA’ rating from China (Lianhe Credit Rating),” he added.
JCRA raised the Philippines’ rating to three notches above the minimum invest grade at the height of the COVID-19 pandemic in June 2020.
Meanwhile, China Lianhe’s AAA rating indicates that a borrower has extremely strong capacity to pay its financial commitments; is highly unlikely to be affected by adverse economic conditions; and has the lowest expectation of default risk.
The Philippine government had issued Panda bonds as part of its efforts to diversify funding sources. The maiden issuance of 1.5 billion renminbi ($230 million) was in 2018, followed by 2.5 billion renminbi ($363 million) in 2019.
As of the end of May, the national government’s total outstanding obligations reached a new peak at P14.1 trillion.
Of this amount, 68 percent or PP9.59 trillion was borrowed from domestic lenders and 32 percent or P4.51 trillion was sourced from foreign lenders.