‘Creditworthiness’ key to economic recovery—DOF
The Duterte administration’s prudent fiscal strategy has allowed the Philippines to maintain its high creditworthiness that enabled it to access funds at the least possible cost for its coronavirus response, the Department of Finance (DOF) said yesterday.
Finance Secretary Carlos G. Dominguez III said the Philippines was able to secure “generous rates and longer terms” from multilateral lenders and the global bond market at a time when governments across the globe have been competing for scarce financing.
“When the government can access debt at least cost, so will our private enterprises in need of assistance. The ability to refinance at lower cost will help us recover more quickly and more sustainably (from the crisis),” Dominguez said during the Kapihan sa Manila Bay forum.
Dominguez said the government’s ability to access highly concessional borrowing rates during the emergency is why credit ratings are crucial in restoring the economy’s health.
“This is precisely the reason why we are guarding (our credit ratings) very well,” he added.
Even amid the pandemic, the Philippines was able to maintain its financially sound status with a 'BBB+' rating from S&P Global and the more recent 'A-' grade from the Japan Credit Rating Agency (JCR), both with stable outlooks.
The government has so far raised a total of $4.83 billion in concessional budgetary support financing from the Asian Development Bank, World Bank, Asian Infrastructure Investment Bank, and the Agence Française de Développement of France.
Of the total financing accessed by the Duterte administration from these development partners, $2.26 billion has been disbursed for government programs.
The government has also recently raised $2.35 billion from the US dollar market with the lowest coupon rate ever in the country’s history.
From domestic sources, the Bangko Sentral ng Pilipinas (BSP) has provided financing to the national government amounting to ₱300 billion to help fund COVID-19 response.
To date, he said, the government has raised ₱1.2 trillion in net domestic borrowings from the beginning of the year to cover the budget deficit, which has widened as revenues fell while state spending has increased to finance programs to beat the unprecedented crisis.
A total of ₱149.2 billion in dividends were also received from government-owned and controlled corporations (GOCCs) since the start of the year to support the fight against COVID-19.
The Department of Budget and Management has thus far released allotments totaling ₱355.6 billion for the government's COVID-response efforts.
Dominguez said the government has contracted more borrowings and allowed for a much larger budget deficit this year to strengthen the healthcare system against the pandemic and finance its social mitigation programs.
He, however, made it clear that the government “cannot banish the basics of fiscal discipline at the risk of bringing ourselves to bankruptcy or severe unsustainable indebtedness.”