Spirit of the grass
According to reports that came out even in news outfits abroad, US-based credit rating agency Moody’s Investors Service recently upgraded its Philippine rating by one notch to Ba2.
It only means, really, that Moody’s puts the country’s credit worthiness at a level called “stable,” which is not fatal, but not good, either.
The “stable” outlook should technically remain for at least a year. To me, it means that the Department of Finance thus will not get clobbered by outrageous interest rates on its bond issuances in the coming year.
Still, I have something to tell you about the upgrade: It was a bit late.
Two other important credit rating companies abroad, namely Standard and Poor’s and Fitch Rating, raised their separate ratings for the Philippines by one notch – or the same level as the latest Moody’s rating – as early as last year.
In fact, Moody’s also upgraded the ratings of our neighbors, such as Indonesia’s, which it upgraded last January to level Ba1, which is higher than our present rating.
So why did the Moody’s upgrade make a big splash?
We have to remember that Moody’s is considered as the largest of the world’s most influential credit rating agencies, bigger even than Standard and Poor’s and Fitch Rating.
Moody’s is said to account for about 40 percent of the world market. More companies and governments hire the services of Moody’s, compared with the other two.
The recent upgrade of the Philippine credit rating thus was a piece of good news for the Aquino (Part II) administration, mainly because it came from Moody’s.
Also, news of the upgrade came as the financial world watched intently the debt crisis in Greece. Violence already erupted in that country, as people protested the belt-tightening measures imposed by international creditors on the Greek government.
Reports abroad said that the events in Greece could trigger a financial crisis in other countries in Europe, such as Portugal, Ireland and Spain.
It is thus feared that the crisis could eventually spread throughout Europe, affecting the rest of the world in much the same way that the financial crisis in the United States that started two years ago affected markets.
Banks in Great Britain have already been warned of the fallout from the debt crisis in Greece.
In a nervous international financial sector, therefore, news of the Moody’s upgrade would seem, for the Aquino (Part II) administration, like the country’s first gold medal in the Olympics.
It could also boost business confidence in the economic team of our leader Benigno Simeon (aka BS), led by Finance Secretary Cesar V. Purisima, who recently received a glowing endorsement from Sen. Ralph Rector before the Commission on Appointments.
According to Moody’s, it raised the country’s bond ratings because of economic policies and decisions made by the Aquino (Part II) administration, such as the P26-billion fiscal surplus in April, which was precisely the area of Purisima.
For a country with an eternal tax collection problem, coupled with the government’s penchant for wasteful spending (i.e. unbridled graft and corruption), combined with our posting of huge budget deficits of about P300 billion a year, that little surplus in April was startling indeed.
In his nomination speech for Purisima, Recto even tried to inject a bit of humor:
“And how much must he (Purisima) raise? P1.65 trillion a year, or about P4.5 billion pesos a day lang naman.
“If government were a taxi, he’s the designated payor of the P187 million meter charge per hour.”
Apparently to emphasize the difficulty of raising government revenue in this country, Rector said that “we have begun to treat taxes as text promos: we want to pay little for unlimited services.”
But how does Purisima intend to sustain the administration’s good fiscal showing in April?
Well, based on the election promise of our leader BS, this administration must resist new tax measures.
Purisima himself has been saying that the imposition of new taxes would only punish those who have been paying for their taxes religiously. The tax evaders simply would continue … well, evading. OK, cheating! They would just keep on cheating.
Thus, Purisima has a mind to implement some “administrative” measures, such as simplifying tax payments. Look, small businesses (such as dental clinics) must employ people—full time—just to attend to concerns of the Bureau of Internal Revenues, if not the concerns of BIR collectors and examiners, some personal “concerns.”
That is not a secret to Purisima. He is a taxation expert, having been once the top man in SGV, the country’s biggest accounting and auditing firm. Really, regarding his abilities, he is not lacking in believers in the business community.
The rating upgrade by Moody’s should only reinforce business confidence in the fiscal management of the Aquino (Part II) administration. “Confidence” of course is the key word here.
You see, Purisima has this bright idea called PPP, short for “public-private partnership program,” under which he wants private companies to undertake major infrastructure projects, precisely because of the government’s fiscal headache.
I am not sure how he intends to push the program, considering that the business community has been running away from infrastructure projects that this country needed several lifetimes ago. In a way, Purisima’s toughest job is to rally business people behind those projects. To do that, he first has to raise their spirits.
