The Philippines’ recent exit from the global money-laundering watchlist is the “biggest” breakthrough that would push the country further towards achieving an “A” credit rating, according to the top executive of the local trust arm of Canadian insurance giant Sun Life.

Speaking to reporters on Friday, Feb. 28, Michael Enriquez, president of Sun Life Investment Management and Trust Corp. (SLIMTC), said the Philippines is on its way to attaining the coveted “A” rating, citing the country’s eventual delisting from the Financial Action Task Force (FATF).

“I think the biggest move was really the exit to the ‘grey list’ on FATF. So, I think that’s one big thing that can really help us as well on our road to ‘A,’” Enriquez said.

This came after he downplayed the overshoot in the programmed fiscal deficit of the Marcos administration, noting that the excess is a mere 1.8 percent.

He said this is not significant enough for the market to punish—through higher borrowing costs, weaker investor confidence, or credit rating downgrade—the government “because the Bureau of the Treasury [BTr] is already so used to how they manage their borrowing program.”

Last week, the BTr reported that the national government’s budget deficit narrowed last year to ₱1.51 trillion, or 5.7 percent of gross domestic product (GDP), an improvement from 6.2 percent in 2023.

Despite this, the deficit missed the government’s target of ₱1.48 trillion, or 5.6 percent of GDP.

Ramping up revenues

Having eliminated some stumbling blocks to a credit upgrade, Enriquez said the government should focus on improving tax collection by continuing to “be diligent in ensuring that they plug all the leakages.”

Although he did not recommend actions on budget spending, citing the controversies that have swarmed around the recently approved national budget, he believes the Philippines, in general, is good to go for the coveted “A” credit rating.

Asked if he expects the government to raise its borrowings this year, Enriquez said it would depend on how successfully it collects taxes and controls spending. High revenues and efficiently managed expenses may not need further borrowing.

However, “I think the fastest way if they really need to plug a deficit is to borrow,” Enriquez argued, but noted that too much borrowing “might pressure interest rates, especially the long-term ones, to move higher.”

Taking into account current market conditions, the SLIMTC chief believes that there is still room for the government “to wait a bit because of lower rates moving forward.”

“I think the other dynamics of the longer-term rates being pulled up were the 10-year U.S. Treasury rates moving higher,” he said.

But since those rates are now declining, the Philippine government is closely monitoring the trend, Enriquez said. The government would also “try to lock in longer-term borrowings.”

“So, I think they’re on their way to trying to time it as they see rates starting to go down.”