Camacho downplays Fitch downgrade of RP rating

Finance Secretary Jose Isidro Camacho said yesterday that credit ratings and subsequent borrowings by the national government could not be dictated by a single rating agency.

"It is the market that determines our borrowings, not the credit rating agencies," Camacho said.

Camacho was reacting to reports that Fitch Rating Agency plans to downgrade the country’s credit rating though "no decision has been formally made."

But strangely, the national government said it can benefit from a downgrade announcement as it would be paying a lower spread on sovereign borrowings arising from the narrowing of spreads of the country’s debt instruments being floated in the international secondary market.

The London-based credit firm zeroed-in on the eroding fiscal position of the government plus the attendant risk brought about by the debt-ridden National Power Corp. (Napocor), which, for the longest time, has been exerting pressure on the finances of the state, not to mention the decision of the authorities to renegotiate and/or rescind, cancel existing contracts with independent power producers (IPPs).

Camacho admitted that the erosion of the government’s fiscal position needs to be address and there already has been a package of measures drawn up by the authorities to plug the deficit.

"We recognize the challenges – deficit and debt stock – and we have a package of measures to address these issues," Camacho pointed out, adding that it is the problem of the rating agency whether to accept these measures as more than enough to check on the tax erosion.

The Finance head reiterated that the threats to downgrade the Philippines’ credit worthiness was "subjective" and a "judgmental call by just one credit agency."