Finance Secretary Carlos Dominguez III receiving the signed financing agreements for the Mindanao Peace and Development Program (RISE Mindanao) amounting to EUR 35.5 million last July 16 at the Department of Finance office in Manila
By Alithea De Jesus
In the midst of criticism from people on the alleged mismanagement of fund and priorities on allocation, Finance Secretary Carlos Dominguez III has assured lawmakers that President Duterte’s economic team will maintain full transparency and exercise sound management of the government’s fiscal resources in meeting the challenges posed by the coronavirus-induced global health crisis.
For her part, Deputy Speaker Loren Legarda commended the economic managers led by Dominguez for this assurance as she expressed her support for the government’s post-pandemic recovery program anchored on the proposed 2021 national budget of P4.5 trillion now pending in the Congress.
“I honestly think that during these times of crisis, having an economic team such as this, especially with Secretary Dominguez, I think we’re in safe hands so to speak,” Legarda said during the recent briefing of the Development Budget Coordination Committee (DBCC) on the President’s 2021 National Expenditure Program (NEP) for the House appropriations committee.
“I’ve worked with him (Dominguez) for the past three years. And thank you for your transparency in even itemizing the fiscal risks and even acknowledging, in fact, that we would have to engage in debt,” added Legarda, who had chaired the Senate finance committee in the previous Congress.
The Senate finance committee is in charge of all matters relating to public expenditures, such as the funds for the spending of the national government and for the payment of public indebtedness; auditing of accounts and expenditures of the National Government (NG); claims against the government; and inter-governmental revenue sharing.
In response to Legarda’s query on the fiscal risks considered in preparing the 2021 national budget, Dominguez said that the biggest policy change that the economic team had to implement was to go over its original budget deficit target of 3.2 percent in order to be flexible in mobilizing fiscal resources for the government’s COVID-19 response efforts.
Dominguez said the government expects a higher deficit-to-GDP (gross domestic product) ratio for 2020 that it aims to keep below or at the median of the levels of its peers in the Association of Southeast Asian Nations (ASEAN) region.
For this year, the economic team projects a ceiling on the deficit-to-GDP ratio at 9.6 percent, which will go down to 8.5 percent in 2021 and 7.2 percent in 2022.
“So for 2020, 2021, and 2022, we have suspended the hard target deficit that we had from 2016 to 2019,” Dominguez said during the DBCC briefing.
Dominguez made it clear that despite breaching the deficit, the government will remain prudent in managing its financial resources, given that the COVID-19 pandemic would require “fiscal stamina” to ensure that the economy would be able to recover quickly from the global pandemic.
The government also needs to be prudent in its borrowings to ensure that future generations, which will have to pay for them, would not be burdened with massive public debt as what had happened in the past, Dominguez said.
He said the government has been “very transparent” with the amount of loans and grants it has secured to support public expenditures in the face of the significant drop in revenues as a result of the pandemic-induced global economic slump.
In his presentation before the House appropriations committee chaired by ACT-CIS Partylist Rep. Eric Yap, Dominguez said that as of the end of August, the Department of Finance (DOF) secured a total of US$8.83 billion in financing for the government’s COVID-19 response efforts from the Philippines’ development partners and the commercial markets. As of September 23, the amount of financing support for COVID-19 from external sources had risen to US$9.9 billion.
Details of these financing agreements are uploaded on the DOF website.
Dominguez said total borrowings for 2020 and 2021 are projected to reach P3 trillion to support priority expenditures necessary for the country’s swift recovery from the COVID-19 crisis and aggressive public investments in infrastructure and social services.
Borrowings are expected to settle at P2.3 trillion in 2022, he said. These borrowings will still be predominantly sourced domestically, he said.
The debt-to-GDP ratio is projected to settle at 54 percent this year and go up to 58 percent in 2021, and 60 percent in 2022.
These projections are still lower when compared to the country’s all-time high debt level of 71.6 percent of GDP in 2004, Dominguez noted.
“So we have mentioned the amount of funds that we have borrowed for the first 8 months of this year. And we have also disclosed that we are borrowing around P3 trillion for each of the next 2 years, for 2021 and 2022,” Dominguez said.
“These are the major fiscal risks that we have disclosed and these are the major fiscal risks that we are managing,” he added.