DOF: Gov’t committed to securing ‘A’ credit rating by 2028

The government remains committed to securing an “A” credit rating from international rating agencies before the end of President Ferdinand R. Marcos Jr.’s term, Finance Secretary Benjamin Diokno said.

The Philippines currently has a BBB+ sovereign credit rating from S&P Global, a major rating agency. This is one notch below the minimum A rating target of the government.

“Our ultimate goal is to get an A rating before the end of the President’s term. We’re fully aware that this is not going to be a walk in the park. But we are committed to work unceasingly to achieve our lofty goal,” Diokno said in his weekly press chat.

Last May 2023, Fitch Ratings affirmed the country’s BBB rating and revised its outlook from negative to stable in view of their improved confidence in the Philippines’ strong medium-term growth after the pandemic and sustained reductions in government debt-to-gross domestic product.

“An A rating would affirm the Philippines’ creditworthiness and would serve as a strong signal to local and international business and financial communities that the country is conducive to long-term investments. In turn, this will increase investment and will eventually help us achieve our long-term economic plans,” Diokno said.

Getting an A credit rating will lower the government and the private sector’s borrowing cost, he added.

“It would improve the lives of the people because they could borrow at lower rate,” he said.

The Finance chief noted that the Philippines managed to maintain investor-grade ratings even during the pandemic, while other countries were downgraded.

Diokno acknowledged that given the current global environment, “getting an A rating promises to be challenging.”

He cited Fitch Ratings’ move to downgrade the United States’ debt rating due to the expected fiscal deterioration over the next three years and the high and growing general government debt burden.

Diokno however said “the Philippines is doing quite well” despite the uncertainty in the global market.

“In pursuit of the A credit rating, the Bangko Sentral ng Pilipinas and the Department of Finance organized in 2019 an Inter-Agency Committee on the Road to A Credit Rating Agenda, or the IAC on the Road to A,” he said.

This aims to effectively coordinate the efforts of member agencies to develop, execute, and monitor the implementation of the Road to A Roadmap.

“Moreover, the IAC aims to enhance engagements with analysts and investors; coordinate engagements with credit rating agencies and third-party raters; and increase the Philippines’ visibility through traditional and technology-based platforms,” Diokno said.

Diokno said the IAC has a three-pronged strategy that focuses on achieving solid economic growth, prudent fiscal management, and strong governance standards and institutions.

In the same briefing, Bangko Sentral ng Pilipinas Governor Eli Remolona Jr. said that the credit default swap (CDS) market is already anticipating the Philippines’ credit rating upgrade.

“If you look at the credit default swap spread, it’s based on a five-year horizon, it’s just 69 to 70 basis points, we’re already at single A credit rating,” Remolona said.

“According to the CDS market, they are anticipating our credit rating to be upgraded to single A. Credit rating agencies don’t just look at our capacity to borrow, pay, but also the governance and fiscal policies that we pursue. In their view, our policies are good,” Remolona added. (PNA)