Country able to repay debt despite crisis, says treasurer

The Philippines is fully capable of repaying its foreign debt despite the political turmoil and a recent string of warnings from credit rating agencies, National Treasurer Omar Cruz said yesterday.

Earlier Moody’s Investors’ Service Inc. followed action by two other major rating companies – Fitch and Standard & Poor’s – and cut the outlook on the Philippines’ sovereign B1 rating to negative from stable, citing the possibility of negative consequences the country’s political problems may have on the budget and external payments.

Cruz stressed that the Philippines won’t default on any of its bonds or other debt.

"It’s far from happening. I know fully well the government’s debt maturities," Cruz said. "I don’t think (Moody’s move) is reasonable at this point."

Latest available data from the Central Bank shows the Philippines’ public foreign debt – which accounted for roughly two-thirds of the country’s total foreign debt of US$55.3 billion (euro45 billion) at the end of March – had an average maturity of 20 years.

Moody’s decision was the latest bad news for the country’s economy, already beset by a gaping budget deficit and a Supreme Court freeze ruling last month to freeze implemenation of an expanded value added tax aimed at balancing the budget by 2010. Opponents claim the broadening of the VAT tax is unconstitutional since it was not approved by lawmakers.

The Philippines’ main stock index fell 0.8 percent to 1,854.04 Wendesday as investors worried about the protracted crisis over allegations President Gloria Macapagal Arroyo cheated in last year’s election. Last week, 10 of Arroyo’s Cabinet members – led by her economic team – stepped down and urged her to do likewise.

Cruz also said the government will be relentless in pursuing fiscal reforms and will work to convince the Supreme Court to lift the suspension of the VAT law.

Arroyo’s spokesman, Ignacio Bunye, said in a statement that the country’s economic fundamentals "remain solid, particularly on the matter of improving our fiscal condition.

"The fate of our economic reform agenda, however, is mainly pinned on the e-VAT law and this is the reason why we are determined to remove all the legal obstacles to its implementation." — AP