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Draft on Federalism could result to irreversible economic consequences

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The head of the President Duterte administration’s economic team, warned that the draft federal Charter could lead to massive job losses in the public sector, reduce funds for the government’s ambitious infrastructure program, widen the budget deficit and downgrade the country’s credit ratings.

Finance Secretary Carlos Dominguez III, said in a statement last Friday, “The possible repercussions could result in dire, irreversible economic consequences.”

He went on, “to avoid this negative economic consequence and maintain the current deficit target of 3 percent, the federal government will have to cut its expenditure program by P560 billion.”

He was asked about its implications and he explained, “This means the national government may have to lay off 95 percent of its employees, or reduce the funds for its ‘Build, Build, Build’ program by 70 percent, or a combination of both.”

Dominguez reiterated that he and the economic team were not against federalism, but they would like to be enlightened on the “ambiguous and unclear” fiscal provisions of the draft federal Constitution and this must be addressed.

Many people and lawmakers agree with the position of Dominguez in his desire for clarifying what seems to be ambiguous provisions in the draft. “We welcome a discussion on the draft so that it is clear and unambiguous. We do not want the revenue assignment and the expenditure assignment to be misunderstood,” Dominguez said.

At the Senate finance committee hearing on the proposed 2019 national budget on Wednesday, the Finance Chief told that with the fiscal provisions set forth in the draft Charter were to be implemented, “the federal government would incur a deficit of 6.7 percent, which may result in a credit rating downgrade for the Philippines.” and consequently higher interest rates, which he described that “Interest rate will go hell”.

For the Department of Budget and Management, there are currently 1.46 million employees in the national government. With the “Build, Build, Build” program, the government plans to roll out 75 “game-changing” flagship projects while spending up to P9 trillion on hard and modern infrastructure until 2022, to usher in what it called the “golden age of infrastructure.”

The Philippines currently enjoys investment-grade credit ratings from the top three debt watchers, namely Moody’s Investors Service, Fitch Ratings and S&P Global Ratings

Meanwhile, Fr. Ranhilio Aquino, a member of the consultative committee that drafted the Charter, to call for the dismissal of both the DOF chief and Socioeconomic Planning Secretary Ernesto Pernia, who also expressed apprehensions over the fiscal provisions.

The dean of San Beda Graduate School of Law, said: “If (President Duterte) favors federalism, let him sack Dominguez and Pernia or command them to keep their traps shut.”

Dominguez shrugged off Aquino’s suggestion. “We respect the opinion of Father Aquino, but we believe that such attitude would not enrich the level of discourse on the proposed Constitution.”

Presidential spokesperson Harry Roque saying on Friday that the Palace “views the differences of opinion on federalism as part of the continuing discourse among members of the President’s official family.”

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