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April 19, 2024

Fiscal consolidation, resource mobilization to reverse P3.2T COVID debt

The Department of Finance (DOF) is ready to present to the incoming administration a fiscal consolidation and resource mobilization plan that the Department says is “critical” to helping the government continue its productive spending, grow out of its pandemic-induced debt, and provide substantial buffers to respond to lingering and future economic shocks.

This new series of measures aims to reverse in a span of 10 years the additional P3.2 trillion debt incurred by the Philippine government due to the COVID-19 pandemic.

Finance Secretary Carlos Dominguez III said that the implementation of a fiscal consolidation and resource mobilization plan is imperative to “ensure that the government can continue to effectively manage its increased budget deficit while spending on investments in infrastructure, education, and healthcare for economic growth and recovery.”

The larger deficit is a result of lower revenue collections due to reduced economic activity during the pandemic and the increased spending to protect lives, beef up the country’s healthcare capacity, procure vaccines, and provide subsidies to vulnerable sectors.

The government also continued its priority programs, such as the ‘Build, Build, Build’, in order to create jobs and set the stage for early economic recovery, spent for the rollout of its distance learning program for public school learners, and provided special risk allowances and free rides to medical frontliners during the pandemic-related nationwide mobility restrictions.

Dominguez warned that inaction on fiscal consolidation could force the government to cut spending on necessary socioeconomic programs or to finance debts with additional borrowings, resulting in cascading effects on interest payments that could also ultimately force budget cuts and stifle economic growth.

“Not pursuing a fiscal consolidation and resource mobilization program may likely lead to serious and spiraling consequences to our financial and economic health,” the DOF chief said.

The DOF is optimistic that the incoming administration and the next set of legislators will recognize the importance and urgency of these measures and implement them at the soonest time possible.

“Pursuing the fiscal consolidation and resource mobilization program as proposed will help us continue to spend on socioeconomic programs, maintain our credit ratings, and grow out of our debt,” Dominguez said.

According to Dominguez, the plan is doable and is designed to secure the gains that we have made under the Duterte administration and to ensure that the government can continue to make economic investments and pursue programs for recovery, maintain its high credit ratings, grow out of its debt faster, and cushion the Philippine economy from future external shocks.

The country’s debt-to-gross domestic product (GDP) level accelerated at 63.5 percent, slightly higher than the internationally prescribed best practice of 60 percent of GDP.