Subsidies, fuel tax suspension would have increased gov't debt — DOF
The Philippine government’s running debt stock would have ballooned to P15.4 trillion by the end of this year had the Duterte administration yielded to proposals such as spending more on pandemic relief and suspending the fuel excise tax, according to the Department of Finance (DOF).
DOF chief economist Gil Beltran said the state’s debt pile would have been P2.2 trillion more than the projected P13.2 trillion by the end of 2022 if the government had not exercised fiscal prudence and bowed to legislators’ pressure to pass all fiscal stimulus bills to address the COVID-19 crisis.
“As we have said over the past few years, the government has consistently exercised fiscal prudence in responding to the COVID-19 pandemic,” Beltran said.
“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 P15.4 trillion,” he added.
The DOF chief economist cited the following proposed measures which would have further bloated the government’s debt:
- Proposed value-added tax (VAT) exemptions for oil, liquefied petroleum gas (LPG), electricity and other commodities and abolition of other taxes
- Various COVID-19 stimulus bills and subsidies
- Proposed exclusion of the 13th month pay, performance-based bonus and other income from taxable income
- Appropriations for new departments or government entities proposed by various legislators
“The government did not support several stimulus bills, each proposing hundreds of billions of additional appropriations, precisely because we understood that this would translate into further increases in the deficit and debt,” Beltran said.
“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,” he said.
Beltran noted that the two Bayanihan Laws — Republic Act 11469, or the Bayanihan to Heal as One Act, and RA 11494, or the Bayanihan to Recover as One Act, 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.
“To deal with the effects of the pandemic in a strategic and cost-efficient manner, we secured additional financing from multilateral partner-institutions to procure an adequate supply of vaccines for the target population,” he said.
“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,” he added.
Beltran also cited other fiscally sustainable economic recovery programs that have been enacted, such as 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.
As of end-April 2022, the government’s running debt balance amounted to P12.763 trillion.
For the first three months of the year, the debt-to-gross domestic product (GDP) ratio — the size of the state’s debt relative to the size of the economy — stood at 63.5%, the highest in 17 years and well over the internationally recommended threshold of 60%.
The pandemic compelled the Duterte administration to borrow more and is projected to incur P3.2 trillion in additional debt, which could bring the debt level to more than P13 trillion by the end of 2022, above the original plan of only around P9.9 trillion. —VBL, GMA News