GOVT HOLDS LAST DITCH TALKS TO AVOID CREDIT DOWNGRADE
MANILA, December 4, 2004 (STAR) By Des Ferriols - The government is holding last-minute consultations with analysts to avoid a possible credit rating downgrade from London-based Fitch Ratings Inc.
Fitch will be the first of three major credit rating agencies to report on its rating action, setting the tone for investor sentiments over the next few months until the end of the first quarter in 2005. Fitch is set to release its rating action on Monday, Dec. 6.
Finance and monetary officials refused to speculate on how Fitch would decide but a flurry of last-minute consultations are scheduled for the weekend as they attempt to convince the agency to maintain its present credit rating.
The Bangko Sentral ng Pilipinas (BSP) said officials would try to convince Fitch to take account of what the Arroyo administration considered as "major events" that could change the countryís medium-term prospects.
These developments, according to BSP officials were the Supreme Court's decision upholding the Mining Act of 1995 and the successful auction of the National Power Corp.ís 600-MW Masinloc coal-fired power plant.
Finance Secretary Juanita Amatong, chairman of the Napocor board, said credit rating agencies should see the governmentís seriousness in privatizing Napocorís assets.
On the other hand, BSP Governor Rafael B. Buenaventura told reporters that officials would try and convince Fitch to consider these two developments before making a final decision.
"The mining development issue was not in the radar of credit rating agencies but they should look at this now," he said. "It will attract foreign direct investments and improve our reserves so that definitely has an impact on our macro-economic numbers."
According to Buenaventura, the successful auction for the Masinloc plant should also add to the encouraging developments.
If Congress would be able to deliver on its commitment to pass three critical measures before the end of the year, he said the prospects for other credit rating agencies would also improve.
Fitch Ratings warned earlier that the country could face further downgrade if the government fails to deliver its commitment to raise revenues by 1.8 percent of gross domestic product (GDP).
Amid worries Napocorís huge debt load, the Arroyo administration had made the commitment to raise revenues through a package of controversial legislation.
According to Fitch, however, swift implementation of these tax increases would be necessary to avoid a change in the countryís outlook, now rated as "stable."
Reported by: Sol Jose Vanzi
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