The Department of Finance (DOF) is considering key recommendations from the International Monetary Fund (IMF) to prevent the government’s debt from rising further.
Finance Secretary Benjamin Diokno said the agency would explore the IMF’s proposal on setting a 60-percent GDP debt ceiling as a fiscal anchor and treating the 3-percent fiscal deficit goal as an operational target to steer fiscal policy in the medium term.
Data showed that as of September 2023, the share of government’s debt to the gross domestic product reached 60.2 percent, lower than 63.6 percent in the same period last year.
The government aims to lower the GDP debt ratio to below 60 percent by 2025.
The IMF also suggested implementing a more ambitious revenue mobilization strategy to generate more resources for economic and social spending.
Diokno said the DOF was actively pushing for several priority tax measures such as the value-added tax (VAT) on digital service providers (DSPs); Package 4 of the Comprehensive Tax Reform Program (CTRP) or the Passive Income and Financial Intermediary Taxation Act (PIFITA); Package 3 or the Real Property Valuation and Assessment Reform (RPVAR); the excise taxes on single-use plastics (SUPs) and pre-mixed alcoholic beverages; the adjustment of the motor vehicle user’s charge (MVUC); and the rationalization of the mining fiscal regime.
“These are being pushed to boost revenue generation to support high-quality spending for socio-economic development and will help attain the government’s goals in poverty reduction and enhance the country’s response to natural disasters while staying on the course of fiscal consolidation,” Diokno said.
The IMF also acknowledged the need to implement the military and uniformed personnel (MUP) pension bill and other similar reforms in conjunction with ongoing initiatives to enhance the oversight of government-owned and controlled corporations (GOCCs).
It recognized Maharlika Investment Corp.’s potential to contribute to addressing infrastructure gaps.
The IMF also underlined the need to increase capacity building in local government units (LGUs) in light of the fiscal decentralization process required by the Mandanas-Garcia ruling.
The DOF said it would continue to assist in the full devolution of government functions and services to LGUs, and be involved in the meetings of the Committee on Devolution (ComDev) to discuss strategies to help the implementation thereof.
The IMF agreed with the government’s strategy of providing targeted support to the most vulnerable sectors of the economy, as recommended by the Inter-Agency Committee on Inflation and Market Outlook (IAC-IMO), as opposed to generalized subsidies.
It cited the Food Stamp Program as having the potential to widen program coverage and improve distribution specifically to reach the most vulnerable households.
The initiative complements the Pantawid Pamilyang Pilipino Program (4Ps), which provides conditional cash grants to the poorest households.
The reduction of tariffs on imported food items was also recommended to reduce inflationary pressures on domestic food prices.
Under Article IV of its Articles of Agreement, the IMF conducts annual monitoring visits to member countries and submits a report to its executive board for discussion.