By Ramon Royandoyan | The Philippine Star
MANILA, Philippines — Before formally sitting as head of the economic team of the incoming Marcos Jr. administration, Benjamin Diokno proclaimed a lofty ambition: an "A" credit rating for the Philippines.
Diokno, who will cut short his term as Bangko Sentral ng Pilipinas governor to join the Cabinet of President-elect Ferdinand “Bongbong” Marcos Jr., said he hopes the country would be able to secure this "upgrade" in his tenure as the next secretary of Finance.
"This has always been our objective, our road to ‘A.’ When we got affirmation during the pandemic of our investment credit ratings, we want to have an A rating sooner rather than later," Diokno said in an early morning interview with ABS-CBN News Channel on Monday.
Before the pandemic tarnished the state’s balance sheet, President Rodrigo Duterte had planned to achieve the coveted A grade in a bid to bring down borrowing costs for the government and make the country more attractive to foreign investors.
But Duterte later abandoned the plan as the health crisis bloated the government’s budget deficit and debt load. But his administration nevertheless managed to keep the country’s investment grade intact, although the so-called “Big Three” credit rating agencies have warned that a sustained rise of debts could trigger a downgrade.
To help his successor tackle the huge debt pile, Duterte proposed a “fiscal consolidation” plan that includes deferring personal income tax cuts, limiting VAT exemptions and imposing new excise taxes, among others.
But Diokno had said he does not favor raising taxes, arguing that, for him, the government should “grow the economy, focus on tax administration first, improve the collection” to cut debt.
"As I said, during the entire pandemic period, the rating agencies both international and regional ratings agencies affirmed our investment grade. I’m confident with the program we will unveil in a few weeks, we will achieve the A rating that we’re aspiring for," Diokno added.
Michael Enriquez, chief investment officer at Sun Life Investment Management and Trust Corp., said that hitting the A goal could prove to be a challenging undertaking for the new administration, which has yet to firm up its economic plans for the country.
"It is a good target. Previous reasons for the upgrade we receive were the new income streams such as excise taxes," Enriquez said in a Viber message. "So given the ballooning deficit, it would definitely be big challenge for them.”