Thursday, 23 February 2012 15:09
Finance Secretary Cesar Purisima has maintained that the Philippines’ credit rating needs to be upgraded as the market now recognizes the economy’s fundamentals and rates it as investment grade.
Purisima met with representatives of Fitch Ratings and Moody’s Investors Service in London on Tuesday to update them on the country’s economic developments.
“I met with them (Fitch and Moody’s) to continue our dialogue on the strength and resiliency of the Philippine economy, as well as to discuss our view that the Philippines continues to be underrated," Purisima said in a statement.
To date, Fitch rates the Philippines one notch below investment grade at ‘BB+’, while Moody’s rating is ‘Ba2’, two notches below investment grade. Both ratings have "stable" outlook.
Also, Standard and Poor’s (S&P) rates the country ‘BB’, two notches below investment grade.
The country was given improvement in its credit rating several times last year alone on account of the continued fiscal consolidation and improvement in external position, among others.
“The market has already recognized the Philippines’ resilience and the strength of our credit standing and is rating us as investment grade,” Purisima stressed.
The Finance chief also pointed out that “in fact, our bond issuance in January marked the lowest US$ coupon ever achieved by an Asian Sovereign for a bond with a tenor greater than 10 years."
The government sold US$ 1.5 billion worth of freshly issued 25-year dollar-denominated bond to the international capital markets last January. The debt paper has a yield of five percent, which is equivalent to 196.25 basis points over benchmark U.S. Treasuries.
Purisima said representatives of the ratings agencies noted the improvement in the country’s debt and revenue ratios, which he attributed to the Aquino administration’s bid to further develop tax administration and reform sin taxes.
He said "the ratings agencies are very keen on our push for reforms in the sin taxes.”
He cited a World Bank (WB) study showing that the government can gain as much as 1.3 percent in gross domestic product (GDP) if the current sin taxes would be reformed.
“Such an improvement in our tax base would definitely boost our drive towards investment grade," he stressed.
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