Rice tariffication, BSP Charter amendment credit positive for PHL -Moody's

The recent passage of two key reforms in the country will be credit positive for the Philippines as these promote greater macroeconomic stability, Moody's Investor Service said Monday.

In a commentary released to reporters, Moody's said the passage of the amendment of the charter of the Bangko Sentral ng Pilipinas (BSP) and the Rice Tariffication Law "will enhance macroeconomic and financial stability, a credit positive for the sovereign."

The Philippine credit rating under the Moody's rating scale is currently at Baa2 with a stable outlook, one notch above the minimum investment grade.

"We expect the expected increase in the volume of rice imports will diminish the price volatility of rice, helping to insulate Filipino households' consumption to adverse agricultural shocks," Moody's said.

Presidential spokesperson Salvador Panelo on February 15 confirmed that President Rodrigo Duterte signed into law the measure which would remove quantitative restrictions on rice imports.

The measure allows unlimited importation of rice as long as private sector traders secure a phytosanitary permit from the Bureau of Plant Industry and pay the 35-percent tariff for shipments from neighbors in Southeast Asia.

The law earmarks P10 billion for the Rice Competitiveness Enhancement Fund, of which P5 billion will be allotted to farm mechanization and P3 billion to seedlings. The fund intends to ensure that rice imports won’t drown out the agriculture sector and rob farmers of their livelihood.

Aside from this, Moody's also cited the passage of amendments in the charter of the BSP, effectively strengthening the power of the central bank.

"The amendment to the BSP's charter expands its supervisory oversight over non-bank financial institutions such as money service businesses, credit granting businesses and payment system operators, which will enhance financial stability given the linkages between the banking system and these entities," said Moody's.

"In addition, the revised charter allows the central bank to issue its own debt securities, providing another tool to fine tune liquidity management and improve the effectiveness of monetary policy," it added. —KBK, GMA News