How the Philippines plans to finance its 2021 budget

The Department of Budget and Management (DBM) on Tuesday submitted to Congress the proposed P4.506-trillion spending program for 2021.

The latest National Expenditure Program (NEP), is 9.9 percent higher than the 2020 budget, and 21.8 percent of the country's Philippine gross domestic product (GDP).

According to the Department of Finance (DOF), the latest estimates suggest that over half or 56.89 percent of the expenditures will be financed by tax collections.

"The latest 2021 estimates (for P4,467 billion in expenditures) suggest that P2,541.6 billion will be funded from taxes," Finance Assistant Secretary Antonio Joselito "Tony" Lambino II said in a mobile message.

This comes as the inter-agency Development Budget Coordination Committee (DBCC) expects revenue collections at P2.717 trillion in 2021, equivalent to 13.2 percent of the GDP, and 7.8 percent higher than the projected collection for 2020.

Following tax revenues, Lambino said that some P175.4 billion of the 2021 budget will be financed by non-tax revenues, while P500 million will be from privatization efforts and grants.

The remaining 39.16 percent or P1.746 trillion, will be financed through loans.

"The 2021 deficit is estimated at P1,749.6 billion (8.6 percent of GDP)," Lambino said in the same mobile message.

For 2020, the latest estimates peg the Philippines incurring a P1.815-trillion deficit, equivalent to 9.6 percent of GDP.

As of July 28, 2020, the government estimates disbursements to grow 14.2 percent to P4.335 trillion, and revenues to drop by 19.7 percent to P2.519 trillion.

To recall, Finance Secretary Carlos Dominguez III earlier said the Philippines will sustain its P3-trillion borrowing program in 2021, with bulk or 75 percent to be financed from local sources.

The latest data available from the Bureau of the Treasury (BTr) indicates that the government's debt has so far swelled to P9.054 trillion as of end-June 2020.

The DOF last month said borrowings in the first four months of the year had reached P1.22 trillion, as the administration ramped its reliance on lending to fund the COVID-19 response and economic relief initiatives.

In June, Presidential Spokesperson Harry Roque Jr. said the Philippines had secured at least $5.758 billion in loans to support efforts against the coronavirus.

The National Economic and Development Authority (NEDA), for its part, said the ratio of the philippine debt to economic growth could likely hit 47 percent this year, given the increased borrowing to finance efforts against the coronavirus disease 2019.

In June, Bangko Sentral ng Pilipinas (BSP) said a 50 percent debt-to-GDP ratio could still be "acceptable," given the "manageable" position of the country. — DVM, GMA News