'Positive ratings to lower interest expense' -- Purisima
The government's interest payments are expected to go down following four positive ratings actions on the Philippines within the first year of the Aquino administration, due mainly to improving external payments position, fiscal consolidation and favorable growth prospects.
The government's interest payments are expected to go down following four positive ratings actions on the Philippines within the first year of the Aquino administration, due mainly to improving external payments position, fiscal consolidation and favorable growth prospects.
These actions include the one notch upgrade by Moody’s Investors Service to “Ba2” with stable outlook in mid-June and Fitch Ratings' one notch rise to “BB+”, a notch below investment grade, of the country's long-term local currency issuer default rating (IDR) and to “BBB-”, an investment grade, the country's long-term local currency IDR the following week.
The first ratings action under the current administration was made in November last year when Standard and Poor's (S&P) upgraded a notch higher its long-term foreign currency sovereign credit rating to “BB”, two notches below investment grade, with stable outlook from “BB-/stable outlook”. Last January, Moody’s changed its rating outlook on the Philippines to positive from stable.
Finance Secretary Cesar Purisima said these ratings action were unprecedented in the country's history but materialized because of better revenue collection, political environment and growth performance.
He pointed out that even as the country is not yet an investment grade, the new administration was able to bring the ratings just below investment grade again because of better fiscal management, among others.
“The ratings upgrade and the (smaller) budget deficit are basis to check if we are really on the right track,” he said.
The national government has been registering a lower year-on-year deficit and even surpluses on account of the improvement of revenue collections.
In the first five months of this year, the budget gap amounted to P 9.54 billion, down from P152.6 billion against the P162.11 billion in end-May last year.
Revenues rose by 16.2 percent to P581.5 billion against P500 billion last year.Purisima said improvement in tax collection means the government will have a lower budget deficit, lower interest expense and lesser need to borrow.
He said this will also enable the government to have readily available funds for programs like the conditional cash transfer program, which has a P23 billion allocation this year, and infrastructure projects.
The power of a nation is its people, thus, the need to invest in education and healthcare, he noted. “This is important so that when the economy takes off, they would be productive participants,” he continued.
Purisima stresses need for efficient revenue collection
The Aquino administration wants a faster growth expansion for the Philippines and this can be addressed by raising the necessary funds through tax revenues to finance government projects and programs.
Finance Secretary Cesar Purisima, who heads the administration's economic cluster, said President Benigno Aquino III has directed the economic cluster to ensure faster growth for the country to generate more jobs for the people.
He cited that since 1998 the domestic economy continues to grow but at a very slow pace.
He said one pillar that the Aquino administration is focusing on is efficient tax collection since this is where the government gets the money to fund the construction of school buildings and the delivery of social services, among others.
“We're running after smugglers and tax evaders. We are helping our people understand the need to pay their taxes,” he said.
The Finance chief said efficient tax collection redounds to lower budget deficit, which in turn, will entail less borrowing and fewer liabilities to pay for the government.
In 2010, the national government posted a P314.5 billion budget gap, lower than the P325 billion set by the previous administration but is higher by 5.3 percent than the P298.5 billion posted for last year.
Purisima said the Aquino administration, which started in the second half of last year, was able to arrest the ballooning fiscal gap because of prudent spending.
As of last May, the budget deficit stood at P9.54 billion, 94.11 percent lower than year-ago's P162.11 billion and is far lower than the P152.128 billion ceiling set for the first half of this year.
Purisima said they are pushing to further increase revenues by running after the professional service sector.
He noted that income tax collected last year amounts to some P160 billion, the bulk of which amounting to P153 billion coming from fixed income earners, while only P7 billion was paid by individuals that include doctors, lawyers and accountants.
He pegs the number of people included under this group to around 700,000 and this is why he has instructed the Bureau of Internal Revenue (BIR) to check who these people are and whether they are paying the correct taxes.
“If they would just add P200,000 a year, that's P140 billion additional revenues for us,” he said.
Purisima added that if the additional P140 billion would be collected it would lessen the burden on the government to finance its programs like the conditional cash transfer, which has a P23 billion budget for this year to cover some 2.3 million families.
Purisima added that if the additional P140 billion would be collected it would lessen the burden on the government to finance its programs like the conditional cash transfer, which has a P23 billion budget for this year to cover some 2.3 million families.
“We need to help out 4.6 million families so if we're able to collect the P140 billion the funding is already covered and we'll have less borrowings,” he added.
