At a news briefing here last Saturday, he said the government's inability to sell the generation and transmission assets of National Power Corp (Napocor) would put additional pressure on its fiscal position.

The Napocor has so far sold only six power plants, or 11 percent of the targeted capacity for sale.

''It will hinder an improvement (in the ratings) if electric sector privatization continues to be delayed. Any potential credit upgrade and change in outlook will be difficult,'' Benard said.

Napocor's hefty debts which have been rising as the firm racked up losses in recent years, are counted as part of the government's contingent liabilities. The privatization program is designed to help reduce that debt burden as well as paving the way for the introduction of fresh capacity and improved infrastructure in the power sector.

In February, S&P raised its outlook on the Philippines' sovereign credit rating to stable from negative after the government posted a better-than-expected budget deficit in 2005 and implemented an increase in the value-added tax.

S&P has also affirmed the country's 'BB-/B' foreign currency and 'BB+/B' local currency ratings.