The Department of Finance (DOF) has maintained the need to anchor on fiscal prudence and sustainability any plans to stimulate the economy amid the crisis brought by the coronavirus disease 2019 (COVID-19), even as state borrowings to beat the pandemic rose to P1.22 trillion as of end-April.
The DOF said in a statement yesterday that net of repayments to the government’s creditors and bondholders for existing loans, the government’s financing increased by an additional P873 billion from end of 2019 to April 2020.
Carlos Dominguez, DOF secretary, said higher borrowings this year are crucial to letting the government carry out a wide range of initiatives for the country to cope with the unexpected shocks unleashed by the COVID-19 pandemic and before that, the eruption of the Taal Volcano.
“While the government is borrowing more than usual this year in order to fund healthcare, social protection and other essential programs while our revenues are down, we have to be careful about spending too much above our means,” Dominguez said.
“None of us knows how long this pandemic will last. As we have borrowed a lot – P1.22 trillion in just four months, to be exact – fiscal space should be saved to afford us elbow room in case future circumstances require a new round of big healthcare spending, subsidies and/or stimulus programs,” he added.
The economic team earlier reported that a target budget deficit of 9 percent, which takes into account the administration’s proposed stimulus measures, would place it at the median of the Philippines’ peer group.
The DOF said this should hold true whether the country is compared to countries in East Asia and the Pacific, to its Association of Southeast Asian Nations neighbors, or to countries with credit ratings in the “BBB” to “A-“ range.
“Loans are not free money. They are advances that we, or even our children and their children, will have to pay for in some way in the future. The Duterte administration’s policy is to be careful not to borrow beyond sustainable levels, lest we fall into a vicious cycle of accumulating unmanageable debt, which might drastically increase our financing costs, and plunge us deeper into debt,” Dominguez said. “Hence, it is an imperative that we limit state spending to a manageable and sustainable level equivalent to a nine-percent budget deficit,” he added.
The latest report from the Bureau of the Treasury revealed that around P982 billion, or 81 percent of the new borrowings, was sourced domestically through treasury bills and bonds and through a P300 billion short-term loan from the Bangko Sentral ng Pilipinas.
The balance, amounting to around P237 billion or 19 percent of the total, was sourced externally through a mix of concessional foreign loans and bond issuances.
