Think tank chided for ‘distorted’ views on RP credit rating

Two House members criticized the independent think tank Ibon Foundation yesterday for what they called its "pessimistic and distorted views" on the effects of a credit rating upgrade for the country.

Representatives Exequiel Javier of Antique and Rodolfo Albano III of Isabela were reacting to Ibon’s statement that a credit upgrade is not necessarily good for taxpayers and the public in general as it would only push the government to borrow more funds.

"An upgrade does not necessarily mean more debts. It will just make access by the government to credit easier if and when it chooses to borrow," said Javier.

He said a credit rating downgrade would have disastrous effect on the economy.

"It narrows our credit options and means billions more in interest payments for future loans. It is also a deterrent to fresh investments," he stressed.

For his part, Albano urged Ibon Foundation to be an optimist instead of a pessimist when it comes to the country’s credit rating.

"Let’s be optimistic and open our eyes to the advantages credit rating upgrades can possibly give us. An upgrade serves as a magnet for investors to infuse capital in our country which will generate more economic activity and opportunity for our people," he said.

He said every nation strives to improve its economic performance to a level that can convince credit rating agencies to give it higher or better marks.

"Here in the country, a credit rating upgrade will reaffirm our economic development and the confidence of the international community, including creditors and investors. The expanded value added tax and other fiscal reforms saved the country from economic ruin. We are now only beginning to reap the fruits of these painful measures," Albano stressed.

Last week, officials of the Bangko Sentral ng Pilipinas announced that they expect credit raters to shortly give the country a better mark on account of its improved financial condition.

The improvement was brought about by a combination of a significant increase in revenue collections due to the expanded value added tax (EVAT) and lower government spending due to a lower budget.

EVAT, together with power increases, doubled the cost of electricity for all households. It caused gasoline prices to hit the P40-per-liter mark.

The reenactment of the P907-billion 2005 budget forced the government spend and borrow less. The recycled budget is about P100 billion lower than the proposed P1.053-trillion 2006 outlay that Congress failed to pass. — Jess Diaz