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Slow pace of reforms tests patience of investors

THE global investment community is growing impatient with the pace of fiscal reforms in the country, an official of the Bangko Sentral ng Pilipinas said.

“There is growing impatience from the investment community with regard to the pace of fiscal reforms. It means that we have to deliver milestones,” Cora Guidote, executive director of the Investment Relation Office (IFO), told The Times. “Their line of questioning is in the progress of the new revenue measures, on raising revenues. We need to deliver milestones, which would be beneficial to the country.”

The government, however, has re-assured London-based credit rating firm FitchRatings that Congress could legislate four priority legislative tax measures to avoid another credit rating downgrade, the Bangko Sentral said.


The government has identified tax amnesty, lateral attrition, rationalization of fiscal incentives and sin taxes on alcohol and tobacco products as the four priority tax measures of the eight tax measures committed by the administration.

FitchRatings is set to release the new report on the Philippines sovereign rating in November after the visiting team has ended its three-day visit Wednesday.

Besides FitchRatings, two more credit firms are set to visit next month, particularly Japan Credit Rating Agency and Moody’s Investors Service, to reassess the country’s credit rating.

In June 2003 FitchRatings downgraded the country’s sovereign rating to BB stable, noninvestment grade. Moody’s has downgraded the country’s sovereign rating to Ba2 negative outlook with noninvestment grade in January this year. JCRA has rated the country with a BBB negative outlook, which is also a noninvestment grade.

The sovereign rating becomes the country’s rating benchmark by default for all corporate issuers. FitchRatings expects Congress to pass and carry out one or two tax measures before the end of the year. She said the Presidential Legislative Liaison Office has presented the four tax measures as priority measures in Congress.

Besides asking the update on the new revenue measures, Guidote said FitchRatings also raised concerns on the privatization of Napocor and the national government’s assumption of the power firm’s P500-billion debt. FitchRatings also asked the Bangko Sentral for actual figures and outlook in the banking and economic sectors such as the balance of payments and how to address inflation and interest rates with the increasing world oil prices.

In 2004 the Bangko Sentral expects BOP to reach $500 million, and inflation is expected to reach to an average of 5.4 percent.

Bangko Sentral Governor Rafael Buenaventura had said the government could not afford another downgrade, because it would be more expensive for the country to borrow in the international market.

By Maricel E. Burgonio

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