S&P RATING AGENCY WORRIED ABOUT RP FISCAL SITUATION
MANILA, FEBRUARY 21, 2008 (STAR) By Iris Gonzales - Standard & Poor’s (S&P) credit rating agency has expressed concern over the country’s fiscal situation, particularly the government’s weak revenue stream.
As such, there will be no ratings or outlook upgrade for now as S&P is still assessing the overall fiscal and economic situation of the country.
S&P, however, said that a ratings action can happen any time.
“The outstanding weakness is in revenue mobilization,” S&P associate director Agost Benard told a press briefing yesterday.
Benard led the S&P review team, which arrived in the country for a series of meetings with government officials from Feb. 18 to 24.
S&P, which is considered optimistic among the rating agencies looking into the Philippines, currently has a BB- rating on the country’s long-term foreign-currency or three notches below investment grade, with a stable outlook.
Benard said the debt watcher’s current rating had already taken into consideration political uncertainties in the Philippines.
He said the political noise caused by the ongoing Senate investigation on the controversial $329-million national broadband network contract with Chinese firm ZTE Corp. was not enough to prompt a ratings action on the country.
Instead, Benard said the ratings agency would continue to monitor improvement on government efforts to mobilize revenues through taxes and not just through the sale of state-owned assets.
Last year, the Bureau of Internal Revenue (BIR) missed its target of P765 billion, collecting only P711 billion.
The Bureau of Customs (BOC) also missed its target of P228 billion last year, collecting only P210 billion.
He said that the BIR and the BOC need to step up collection efforts, and that pending measures in Congress to raise more taxes should be passed.
Benard, however, noted improvements on the country’s overall fiscal situation, particularly efforts to contain last year’s budget deficit significantly below the P63-billion programmed ceiling.
Last year’s deficit stood at P9.4 billion, Finance Secretary Margarito Teves earlier reported.
“What we would like to see ideally is that fiscal consolidation and debt reduction can be maintained while infrastructure spending is there,” Benard said.
Benard credited the improved fiscal situation to Teves and expressed hope that the Finance chief would retain his post.
“It is highly desirable that he stays,” Benard noted amid rumors that Teves would quit his post. Teves has consistently denied the reports.
On the government’s plan to balance the budget this year, Benard said this is achievable. “The deficit target is achievable. We hope that it will be achieved,” he said.
S&P is the second credit rating agency to send a review team to the Philippines this year after United States-based Moody’s Investors Service visited the country last January. Last Jan. 25, Moody’s raised its outlook on the country’s key ratings to positive from stable, citing progress in government efforts to stabilize public sector finances.
The affected ratings include the B1 long-term government foreign- and local-currency ratings, the B1 foreign-currency bank deposit ceiling and Ba3 foreign currency country ceiling.
Moody’s B1 rating is four notches below investment grade.
Chief News Editor: Sol Jose Vanzi
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