Gov’t aims for investment-grade mark by 2013

The government took heart from the recent debt rating upgrade from Fitch Ratings and had its sights on acquiring an investment-grade badge by 2013.

“We hope to hit investment grade” in the first half of the Aquino administration’s term, Finance Secretary Cesar V. Purisima told reporters.

Fitch Ratings raised the country’s long-term foreign currency debt to a notch just below investment grade, citing “progress on fiscal consolidation against a track record of macro stability, broadly favorable economic prospects and strengthening external finances.”

Purisima expressed confidence of achieving the goal based on various aspects of the domestic economy.

“For one, the macroecononmic environment is well-managed,” he said. “Looking at the progress of efforts on fiscal sustainability, we can recognize that the Philippines deserves an investment grade rating.”

With a goal of reducing the budget deficit to 3.2 percent of gross domestic product, or P300 billion this year, the government has so far shown a surplus of P61 million as of the end of April.

Purisima said that in terms of the ratio of debt to GDP (gross domestic product or the total output of the domestic economy), the level has gone down to 51.2 percent based on 2000 prices.

“If we net off the Bureau of the Treasury’s bond sinking fund, the ratio would be 42 percent, which is comparable to that of neighboring countries,” he said.

He was referring to a minimum fund that the BTr is required to maintain as a guarantee that it could pay off debts that are about to mature.

Also, the finance chief said the foreign exchange component of government debt had substantially gone down to less than 30 percent of GDP from a peak of 105 percent.

Purisima said foreign borrowings will account for a quarter of total borrowings in 2012.

“Our goal is to bring it to around 20 percent by the end of President Aquino’s term,” he said.

In a statement, Budget Secretary Florencio B. Abad said last Thursday’s credit upgrade by Fitch would allow the government better access to more affordable financing with better terms.

“This would allow us to further reduce the burden of interest payments on national coffers and free up funds for productive projects,” Abad said.

“Also, the increased confidence in our macroeconomic fundamentals helps us attract more direct investments and business activity,” he added.