PH eyes top credit ratings before end of Duterte term
In line with the goal to secure an “A” credit rating before President Duterte steps down in 2022, the economic team is watching over its borrowings and aiming to further hike revenue collection even as it speeds-up the rollout of big-ticket infrastructure projects while cheap money is still available to the Philippines.
Socioeconomic Planning Secretary Ernesto Pernia said earlier that the ambitious “Build, Build, Build” infrastructure program was “now accelerating considerably, given that we’re going to be upper-middle income country next year.”
“We really have to fast-track the approval of the projects, especially in terms of funding, so we can avail ourselves of concessional rates. We have only up to 2022 or 2023 to do that, so that’s one motivation we have in rushing, having more ICC meetings to get projects going,” Pernia said after the National Economic and Development Authority’s Investment Coordination Committee-Cabinet Committee (Neda ICC-CabCom) meeting where Duterte’s economic and infrastructure teams approved 12 big-ticket projects worth a total of P626.1 billion.
When the Philippines becomes an upper middle-income country—defined by the World Bank as having per capita income above $3,956—next year, the country will lose by 2022 access to preferential interest rates it is currently enjoying whenever it borrows from bilateral partners and multilateral institutions.
As such, Finance Secretary Carlos Dominguez III said the government had come up with a roadmap to achieve “A” credit ratings within the next two to three years so that the country could continue borrowing at lower rates especially to bankroll massive infrastructure projects.
Credit ratings are a measure of a government’s creditworthiness. As the stability of state finances was also related to a country’s performance, credit scores serve as a proxy grade for the economy.
Improved ratings would allow the government to demand lower rates when it borrows from lenders, which could translate to lower interest rates for consumers and businesses borrowing from banks using government-issued debt paper as benchmarks for their loans.
The Philippines currently enjoys investment grade credit ratings from the top three debt watchers, namely Fitch Ratings, Moody’s Investors Service, and S&P Global Ratings.
Dominguez said the roadmap was being worked on by the Bangko Sentral ng Pilipinas (BSP), Department of Finance (DOF), Bureau of the Treasury and Neda.
“We really mean to address the need for us to improve our credit rating, because we’re going to lose our special interest rates since we will be graduating already to upper middle-income country status. So we have to make sure that the differentials in the interest rates will be lessened with the credit upgrade,” Dominguez said.
To achieve the “A” credit rating goal, Dominguez said it was crucial to have the comprehensive tax reform program passed “to increase our tax revenue as a percentage of GDP (gross domestic product).”
“That’s why our tax reform is so important, and we’re very happy that the legislature is seeing their way to supporting us,” Dominguez said.
The roadmap will “make sure our GDP is growing faster than our loans, so we don’t reach 42-percent debt-to-GDP ratio,” he said, referring to the government’s target to keep the share of borrowings to the economy at manageable levels.
Dominguez said the economic team was “working hard” to achieve “A” credit ratings “so that it mitigates the jump in borrowing costs.”
While the government ramps-up borrowings in the next two years, it is also important to speed-up the implementation of projects, Presidential adviser for flagship programs and projects Vivencio Dizon said.
“It’s important to note that since the Neda [Board] approved the new list, we’ve already approved a total of 14 projects,” Dizon said, referring to the expanded “Build, Build, Build” pipeline now composed of 100 projects. INQ
