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Philippines: Economic managers reject call to swell budget deficit
MANILA, Philippines — The government’s economic team has thumbed down a proposal to breach the budget deficit target to finance a further stimulus package, insisting that spending should be moderated to save up resources in the event the pandemic drags on.
Finance Secretary Carlos Dominguez yesterday rejected Senate Minority Leader Franklin Drilon’s suggestion for the economic team to consider exceeding its deficit and debt ceilings, similar to what other emerging markets are doing, to widen financial support for the poor.
“Each country has to determine what that particular level [fiscal deficit] is at. And we should also remember that we should assume how long this COVID is going to last,” Dominguez said in a Senate hearing.
“I do not believe there is a magic bullet or a magic wand that will solve this problem, this is going to be with us for a long time. Therefore, our goal is to land in the middle of the pack and that we should conserve our resources for a long fight,” he said.
In a policy paper last year, the International Monetary Fund (IMF) warned against tightening too quick on spending, arguing this may disrupt the impact of measures to create jobs for displaced workers and lift people out of poverty.
“Given the large deficits and jump in debt levels, countries will need to rebuild fiscal buffers over the medium term, [but] tightening too fast could undermine the recovery and efforts to foster job creation, which is critical to reduce poverty,” the IMF said.
Although the government plans to increase expenditures until 2024, spending will go down as a share of the economy from 23.9 percent this year to 22.4 percent in 2022, 20.7 percent in 2023 and 19.9 percent in 2024.
Slowing the growth of expenditures forms part of the government’s target to revert the deficit ratio to pre-pandemic levels. Projecting a budget deficit of 9.3 percent in 2021, it is expected to fall to 7.5 percent next year, 5.9 percent in 2023 and 4.9 percent in 2024.
Also, the economic team’s fear of the deficit program ballooning beyond plan prevents senators from passing a counterpart measure to the Bayanihan to Arise as One Act, or Bayanihan 3. The Bayanihan 3, as approved by the House of Representatives, requires funding of P401 billion.
More than half of the stimulus bill at P216 billion will be spent for the distribution of P2,000 worth of social amelioration to each Filipino: P1,000 within the month of the measure’s enactment, and another P1,000 three months thereafter.
“We’ve been working at this [Bayanihan 3] for the last six or seven months, but the revenues to make it fiscally neutral are just not there at the moment,” Dominguez said.
Source: https://www.philstar.com/business/2021/09/10/2126046/economic-managers-reject-call-swell-budget-deficit