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By Maricel E. Burgonio,
Reporter
A TEAM from the Japan Credit
Rating Agency (JCRA) is in Manila to conduct a review that may
well hold the key to an upgrade in the Philippines’ international
creditworthiness.
In June last year, JCRA upgraded
its outlook on the Philippines from “stable” to “positive.”
The company holds a “BBB minus” rating on the country. This
means the Philippines has moderate risk and adequate capacity to pay
its external obligations, with the country’s economic condition
seen key to any impairment of its ability to service its debt.
The outlook upgrade indicates the
possibility of an actual improvement in the country’s credit
rating. A higher rating would allow foreign funds heretofore barred
from investing in junk-rated entities to place their money in the
Philippines.
The inflow of foreign funds in
turn would boost the domestic economy by way of higher foreign
exchange reserve, a strong local currency, and investments in
job-generating activities.
Yoshihiko Tamura and other JCRA
officials on Wednesday began their three-day visit, which would
involve meetings with officials of the Bangko Sentral ng Pilipinas (BSP),
Department of Finance, and the Bureaus of Internal Revenue (BIR) and
of Customs.
The JCRA earlier said the
Philippines’ ability to sustain economic growth and improve tax
collections is crucial to a credit rating upgrade. The rating
company said the country should strengthen its tax collection before
it can expect an upgrade.
On Tuesday, The Manila Times
reported that the country’s economic managers again cut the
country’s economic growth goal this year amid higher inflation and
a global slowdown. A Times source said the inter-agency Development
and Budget Coordinating Committee cut the country’s growth target
to between 5.5 percent and 6.4 percent, from an already revised 5.7
percent to 6.5 percent.
Also on Tuesday, the government
announced that it incurred a budget deficit of P15.4 billion last
month, a reversal from the P1.6-billino surplus recorded in the same
month last year. Revenue collections reached P101.4 billion, down by
2.5 percent compared with the same period last year.
The government has since put off
to 2010 a plan to balance its budget this year on account of higher
public spending meant to cushion the adverse impact of higher
inflation and a slowing economy.
Foreign donors insist
VAT on oil should stay
Separately, the Philippines’
foreign donors on Wednesday reiterated their opposition to any
revision of the value-added tax (VAT) law.
“There was broad consensus
among participants [in the Special Philippines Development Forum]
that across-the-board measures such as a reduction in the VAT rate,
abolition of the VAT on oil, or changing the VAT on oil to a
specific tax, would not be the appropriate tool for the objective of
supporting the poor since most of the benefit from reducing the VAT
would benefit the better off,” the World Bank said in a statement.
“It was argued that such
measures could even backfire as lower revenue effort could undo some
of the gains that the Philippines has reaped from past fiscal and
economic reforms,” the Washington-based lender said.
The statement was issued amid
legislative deliberations on a bill removing the VAT on oil and
strengthening the law imposing the excise tax on the imported
commodity.
Besides the World Bank, foreign
donors that participated in the special meeting include the Asian
Development Bank, Australia, Austria, Canada, the European
Commission, France, Germany, the International Monetary Fund, Japan,
Korea, Spain, New Zealand, the US, and the United Nations.
The Department of Finance expects
to collect P119.58 billion from VAT this year, a 34.5-percent
increase from last year’s P88.93 billion.
In the first five months of the
year, VAT collection stood at P42.91 billion.
--With Darwin G. Amojelar
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