The Duterte administration will not put the country’s investment grade status at risk for massive stimulus, as Finance Secretary Carlos G. Dominguez III, who once criticized his predecessor obsession with credit ratings, explained “circumstances” today have changed.
Amid calls to prioritize borrowings for stimulus program over a possible credit rating downgrade, Dominguez is standing firm against any large-scale additional spending proposal that requires more financing.
Dominguez warns any stimulus package funded by borrowings would shot-up the government’s budget deficit, jeopardizing the country’s ability to pay off its debts, or creditworthiness.
When Dominguez took office in 2016, he said in several occasions that the previous administration had refused to spend to shore up credit ratings that detached the government from the everyday lives of Filipinos.
Dominguez had also said the previous government’s lack of empathy using its “fancy calculations” was “a major reason why our people decided to vote out the old and vote in a new administration.”
But critics now claimed that Dominguez also failed to learn from the shortcomings of his predecessor that the Duterte administration criticized for being infatuated with credit ratings.
Dominguez, however, defended his stance not to place the credit ratings at risk as present circumstances are totally different before they took office five-year ago.
“Since 2016 we have ramped up spending in physical infrastructure and in human capital investments but also increased revenues through tax reform measures and vast improvements in tax administration. The past administration did neither,” Dominguez said.
Unlike during the years of his predecessor, Dominguez also said the government now needs to prudently manage its financial resources to prepare for the long-drawn out battle against coronavirus.
Should the government incur an unmanageable fiscal deficit and suffer a credit rating downgrade, he said this will jack up borrowing costs at a time when the nation badly needed better financing terms for its COVID-19 response.
“The pandemic curtailed economic activity which reduced out tax collections and forced us to increase our borrowings to spend for health care and to sustain our infra investments to pump prime the economy,” Dominguez said.
“It appears that we will continue in the borrowing mode until next year. It is therefore extremely necessary to maintain our good credit rating so we can continue to borrow at favorable terms,” he added.