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DESPITE the Philippines’ record budget surplus in
the first 11 months of last year, sustaining this fiscal improvement
remains a concern for at least one of three key international credit
rating firms.
During a recent visit to Manila,
representatives of Moody’s Investors Service reiterated that tax
revenues and not privatization proceeds should finance public
infrastructure projects and the reduction in the country’s debt.
“We agree, that’s why we’re
doing something about it. We’re moving heaven and earth to get the
efficiencies. There’s no question about it,” Finance
Undersecretary Gil S. Beltran told reporters.
In a document, the Department of
Finance said the government is likely to have ended 2007 with a
budget deficit that is way below the ceiling set for the period. The
“worst-case” scenario is for a fiscal gap of P15.1 billion, much
lower than the P63-billion deficit programmed for 2007.
This worst-case scenario is
tantamount to keeping the deficit at 0.2 percent of the economy, as
measured by the country’s gross domestic product (GDP).
The same document showed the
medium-case scenario provides for a revenue shortfall of P9.1
billion, while the best-case would mean enjoying a P300 million
surplus at end-2007.
In a letter to the Department of
Finance, the Bangko Sentral ng Pilipinas (BSP) earlier said the
country has yet to reduce much of its debt.
Moody’s, which rates the credit
worthiness of countries and companies, said the Philippines’
public finances are still vulnerable to external shocks, despite
advances made in fiscal consolidation during recent years.
It added that privatization
proceeds will diminish after 2008.
Moody’s had raised its
sovereign credit outlook on the country to “stable” from
“negative,” attributing it to government’s progress in
containing the fiscal deficit and in easing dependence on external
financing.
The outlook upgrade means that
Moody’s is likely to keep its current rating of below-investment
grade on the country in the succeeding six months to a year.
“We stated in February [2007]
that a change in the Philippines’ rating outlook to stable from
negative would depend on the achievement by the government of its
2006 fiscal targets, coupled with prospects of further deficit
reduction in 2007 and beyond,” said Thomas Byrne, Moody’s
vice-president, in a statement.
Bureau of Treasury data showed
that debt payments by the national government declined in November
due to lower interest rates and the rapid appreciation of the peso.
Its debt servicing reached
P28.466 billion that month, or P2.846 billion lower than the
P31.312-billion paid out last October. This brought the 11-month
payments to P591.778 billion.
Debt servicing refers to payments
of both interest and principal. The debt service burden excludes
rescheduling or refinancing of existing debt and conversion of debt
to equity.
Last year, total debt servicing
reached P854.370 billion.
Interest payments dropped by
P4.796 billion to P13.828 billion in November from P18.624 billion
in October. Total interest payments so far this year reached
P255.141 billion.
Of the total, domestic and
foreign interest payments reached P147.173 billion and P107.968
billion, respectively.
Payment of principal, however,
grew P1.950 billion to P14.638 billion in October from P12.688
billion in September. This brought the 10-month principal payments
to P33.5637 billion, consisting of domestic payments of P277.836
billion and foreign payments of P557.801 billion.
The finance department said that
due to low interest rates and a stronger peso, the government saved
P32 billion at end-November this year in debt servicing costs.
The lower-than-expected interest
rates meant the government would spend less on debt servicing, both
for domestic and foreign loans, while the appreciation of the peso
trimmed the government’s foreign-currency denominated debt in peso
terms.
Government’s total spending in
the first 11 months reached P1.032 trillion.
--Chino S. Leyco
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