AN UPGRADE to a credit rating of “A” is achievable in the next 18 months if the government addresses issues like the lifting of the bank secrecy law and raises per capita income, according to Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa C. Guinigundo.
“S&P gave us BBB+ with a stable outlook. What we want is for the next 18 months that we’re able to address all the issues raised including per capita income, the current account… the secrecy of bank deposits. Once these are addressed probably we can expect an upgrade in the next 18 months,” Mr. Guinigundo said in a news conference during the 2019 Pre- State of the Nation Address (SONA) Economic and Infrastructure Forum in Pasay City.
Mr. Guinigundo, however, said that the government should push for these developments by legislating the remaining components of the Comprehensive Tax Reform Package (CTRP), because these are needed for overall fiscal health, and not simply to obtain a credit rating upgrade.
S&P Global Ratings increased the Philippines’ credit rating to BBB+ from BBB.
Asked if he is positive that these can be achieved in the next 18 months, Mr. Guinigundo replied, “It is not a question of whether we are positive. It’s what we need to be able to address those issues raised not only by credit rating agencies but also by the BSP itself.”
“We need to establish the paper trail of all these transactions… Once the deposits hit the banks, ‘di mo pwede galawin iyon. Hindi ka na pwede magtanong (you can no longer do anything, You can no longer ask questions).”
“We need to get those bills enacted in Congress because that’s what we need to be able to sustain a high level of economic growth for our country and for our people. If the credit rating agencies recognize those accomplishments, fine, they give us credit upgrade. But we are not doing this for the sake of getting an upgrade,” Mr. Guinigundo said.
Finance Secretary Carlos G. Dominguez III has said that the recent upgrade from S&P should encourage lawmakers to pass the whole CTRP in two years to be able to achieve a higher credit rating of A.
“We want to pursue the remaining tax reform measures to ensure sustainable financing for the infrastructure and human capital expenditures,” Mr. Dominguez said.
Mr. Dominguez clarified that package 2 of the CTRP, which seeks to rationalize corporate income tax, will not remove fiscal incentives but only modernize them.
“We want our tax incentives program to be like those in other countries,” Mr. Dominguez said.
Mr. Guinigundo, on the other hand, said that a credit rating upgrade would be good both for the private and public sector, but is not the main reason for the push for passage of the CTRP.
“May benefits din iyang credit upgrade. (A credit rating upgrade will bring with it a number of benefits) ‘Yung tungkol sa TRABAHO and other tax reform packages, are they good? (Are the tax reform packages including TRABAHO good?) Yes. Because it we are able to pass those revenue-raising laws, then our propensity to borrow from abroad will be reduced. Yung level of both external and internal indebtedness will be much less. Hindi mo na kailangan umutang (the need to borrow externally and internally will be reduced) because you’re able to pay your way in supporting the Build, Build, Build program,” Mr. Guinigundo said.
Mr. Guinigundo also said the Philippines and its latest Panda bond float amounting to 2.5 billion yuan received a rating of AAA from China Lianhe Credit Rating Co. Ltd.
“We raised funds through the Panda bond market and they gave us 32 basis points. A bond given 32 bps is actually an AAA. As far as China is concerned, the Philippines enjoys an AAA credit rating,” he said. — Reicelene Joy N. Ignacio
