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April 19, 2024

NG debt would have ballooned to P15.4T without fiscal discipline

The Department of Finance (DOF) said that the debt of the national government would have reached P15.4 trillion in 2022, higher by P2.2 trillion because of revenue-eroding legislative proposals or those requiring new appropriations, had the Duterte administration not exercised fiscal discipline in responding to the COVID-19 pandemic.

Chief economist and former DOF Undersecretary Gil Beltran said that the government’s pandemic response strategically targeted the most vulnerable sectors.

“As we have said over the past few years, the government has consistently exercised fiscal prudence in responding to the COVID-19 pandemic. We spent what we had to, but not more than what we could afford. In fact, had we acquiesced to pressure for us to spend more, our debt would have increased by P2.2 trillion more and reached P 15.4 trillion,” Beltran said.

Financing for the two Bayanihan Laws focused on ensuring that the most essential health interventions and emergency economic relief measures for populations most adversely affected by the pandemic were funded fully.

Beltran was referring to Republic Act 11469 or the Bayanihan to Heal as One Act and RA 11494 or the Bayanihan to Recover as One Act.

“Aware of the effects of additional spending on our borrowings, the DOF worked closely with legislators to limit the interventions under Bayanihan II to P140 billion, despite the objections of many other stakeholders,” Beltran said.

According to Beltran, the government did not support several stimulus bills, each proposing hundreds of billions of additional appropriations as this would translate into further increases in the deficit and debt.

To deal with the effects of the pandemic in a strategic and cost-efficient manner, he said that the government secured additional financing from multilateral partner-institutions to procure an adequate supply of vaccines for the target population.

“The accelerated vaccination program, along with shifting to the alert level system with granular lockdowns and increased public transport capacity, enabled us to aggressively reopen the economy and restore jobs,” Beltran said.

Other fiscally sustainable economic recovery programs have also been enacted, including the Financial Institutions Strategic Transfer (FIST) Act, which helps banks extend credit to more sectors by allowing them to offload non-performing assets and non-performing loans to FIST corporations; and the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, which balanced a reduction in the corporate income tax (CIT) rate with the rationalization of fiscal incentives.

The passage of proposed COVID-19 stimulus bills and other revenue-eroding measures would have led to additional spending or revenue losses of at least P2.2 trillion.

The include the proposed value-added tax (VAT) exemptions for oil, LPG, electricity and other commodities and abolition of other taxes, various COVID-19 stimulus bills and subsidies, the proposed exclusion of the 13th month pay, performance-based bonus and other income from taxable income, and appropriations for new departments or government entities.