Government ramps up effort to get ‘A’ credit rating

MANILA, Philippines — The country’s ability to raise enough revenue and minimize borrowings is critical in obtaining the much coveted “A” credit rating from international rating agencies, according to the Department of Finance.

DOF Secretary Carlos Dominguez said the government is ramping up reforms as part of the “Road to A” program aimed at obtaining the A credit rating from S&P Global Ratings.

Dominguez said the government continues to push the Comprehensive Tax Reform Program (CTRP) to raise the country’s tax effort and bring down the ratio of debt to GDP.

“I cannot tell you how soon, but we have to take certain action to do this. Among them is our tax reform program. In order to increase our tax revenue as a percentage of GDP, that’s very important. Also to make sure that our GDP is growing faster than our loans so that we don’t reach 42 percent debt-to-GDP ratio,” the DOF chief said.

Last April, the Philippines scored the highest credit rating in history after S&P upgraded the country to BBB+ or a notch lower from the much coveted A category on the back of consistent economic growth and prudent spending.

Dominguez expects another credit rating upgrade from S&P in two years as the government continues to pursue financial reforms and maintain fiscal discipline while implementing a massive infrastructure program.

“That’s exactly why we’re working hard, so that it mitigates the jump in borrowing cost,” he said.

The DOF will continue to maintain fiscal discipline even as the government substantially increases its spending on infrastructure and human capital development.

Dominguez said the DOF, Bureau of the Treasury, Bangko Sentral ng Pilipinas, as well as the National Economic and Development Authority continue to pursue the roadmap to A rating especially now that the Philippines will soon be upgraded as an upper middle income or UMI country.

“We mean to address the need for us to improve our credit rating because we’re going to lose our special interest rates since we will be graduating already to UMI status, so we have to make sure that the differentials in the interest rates will be lessened with the credit upgrade,” Dominguez said.