Wednesday, November 22, 2006 Severino: What is a credit rating? By Gil Alfredo Severino Think Economics
IT HAS something to do with what finance managers call “creditworthiness”, a situation where international lending circuits, networks, syndicates (not what you are thinking), unilateral and bilateral lending institutions or a particular bank, declares a borrower qualified and that lenders are confident of such borrower’s capacity to pay.
Early part of November, coming from a family vacation in Hong Kong, President Gloria Macapagal-Arroyo in an arrival speech articulated Moody’s survey result that the country had achieved a credit rating from “negative” to “stable.”
This news circulated all over the world (even my Taiwan-based Kuomintang appointee sister emailed her optimism).
Why? It is because Moody, together Standard and Poor’s http://en.wikipedia.org/wiki/Standard_and_Poor%27s and Fitch Ratings are the world’s largest credit rating agencies. Their declaration, mostly based on national income accounting, is tenets in the global financing empire.
The following day, business pages reverberated with news about infrastructure finances (obviously vestiges of the “mega” SONA syndrome), national fiscal management and improved revenue collections as bases for the Moody ratings. Empirical data, please.
The President’s vacation hangover appeared to be timed with the publication of Transparency International’s (TI) 2005 Global Corruption Barometer, where the Philippines was among the 13 countries where corruption is worst by 50%; which means of the 55,000 people surveyed in 69 countries, more than 50% of the respondents here in the Philippines feel that corruption increased a lot!
This is open to various interpretations but what TI explained was how many percent of one’s income goes to corruption (ask any businessman you meet)? How many young mothers feel that government exploit their babies through various corruptions? Others might even raise TI’s 50% to 100%. This is not news in the first place; the point simply understands scientifically that poor households are hurt most in terms of “corruption salary deductions”.
Mathematically correlate Moody’s credit rating with Transparency International’s and the result is “doom and gloom”.
The Moody credit ratings is directional not the point of destination. Already at this point, Finance Secretary Margarito Teves is expecting election spending spree and the dole out fiesta next year.
UP Economics Professor Dr. Benjamin Diokno warned of discipline. The 2004 overspending might be repeated (warning to incumbents); and that Gloria Macapagal-Arroyo, PhD Economics, should know better.
Moody’s outlook will be useless unless the political culture is freed from the bondage of money politics. This was not given enough publicity, but Moody itself is very concerned of the forthcoming May election. Our sole consolation is that there will be election on the basis of experts’ opinion. Beyond this, it is better to stretch our understanding of “Biyaya ng Pagtitiis” (blessings of forbearance).
IMF last Saturday warned us of Government Owned and Controlled Corporations, among the highest, if not the highest chunk in our almost 6 Trillion National Debts. What can this Moody ratings do? Here in the local, Moody’s credit rating effects is indirect.
The dynamics of the local economy is different from the national, but the interplay of corruption and unrestrained expenditures is universally destructive, homicidal and suicidal. The local is not exempted from electioneering. Among the latest, we hate this Hilmarc issue, planters’ walkout in a DAR consultation, the alleged “victimization” of Chief Merced (there are more victimization stories), the traffic, drugs, vendors, floods, the unsolved slaughterhouse, etc. None can flee from the social costs of all these.
For questions and comments, please email gil_severino@yahoo.com
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