The Bangko Sentral ng Pilipinas (BSP) on Monday said the incoming administration will inherit a better economy, but faces higher debt as the outgoing government borrowed more to finance infrastructure projects and COVID-19 response efforts.
In an interview with ANC, BSP Gov. Benjamin Diokno said the next administration would be inheriting a sound tax system which was reformed many times under the Duterte administration.
At the same time, President Duterte’s successor would also be the recipient of many structural reforms such as the amendments of the Retail Trade Act, Foreign Investment Act, and Public Services Act, Diokno said.
“In other words, the next administration will inherit a much better economy than what we inherited from the previous one, but at the same time, it is faced with increasing public debt as a result of the COVID pandemic,” Diokno stressed.
He said before the pandemic, the country’s debt-to-GDP ratio was in the area of 39.6 percent, but rose to 60.5 percent because of the COVID-19 response, and the accompanying drop in revenues.
“But this level is still pretty much manageable as long as we continue to grow at between 6 to 7 percent in the next few years,” Diokno said.
“That said, this [next] administration’s first order of business, I think, is to present to the people and to the international community what I call a fiscal consolidation program. What it will do in the next three years, at least, is to reduce the deficit-to-GDP ratio which has increased due to the pandemic,” Diokno said.
“And that has to be done, the framework should include timely and efficient implementation of the tax laws and recent amendments to the Retail Trade Act, Foreign Investment Act and Public Service Act. Efficient allocation of budgetary resources by continuing the ‘Build, Build, Build’ program and improving the tax spending mix of local government units,” Diokno added.
Earlier, Finance Secretary Carlos Dominguez III said his agency will prioritize in the last two months of the Duterte presidency the finalization of a comprehensive fiscal consolidation and resource mobilization plan for the next administration to ease the transition and keep the momentum of the Philippines’ economic recovery from the pandemic.
He said the Department of Finance (DOF) was also able to maintain fiscal discipline and the Philippines’ high credit ratings despite economic difficulties triggered by the pandemic and other external shocks.
Latest data from the Bureau of the Treasury showed that the country’s total outstanding debt as of end-March 2022 further increased to a record P12.68 trillion from P12.09 trillion in end-February 2022, due to more government borrowings to finance infrastructure projects and COVID-19 response efforts.
The government’s domestic debt amounted to P8.87 trillion, which is P455.45 billion or 5.4 percent higher compared to the end-February 2022 level. For March, the government successfully raised P457.80 billion through its domestic Retail Treasury Bond issuance and debt exchange transaction.
From the end-December 2021 level, outstanding domestic debt has increased by P698.24 billion or 8.5 percent.
On the other hand, the external debt of P3.81 trillion was P130.84 billion or 3.6 percent higher from the previous month.
The economy is projected to grow 7 to 9 percent this year, stronger than the actual 5.7 percent in 2021, which was a reversal of the 9.6-percent contraction in 2020 due to the pandemic.