DOF: PHL debt would have reached P15.4-T without fiscal discipline

Department of Finance (DOF) Chief Economist and former Undersecretary Gil Beltran has said that the debt of the national government (NG) 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 over two-year COVID-19 pandemic.

“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.

He added that the government’s pandemic response strategically targeted the most vulnerable sectors.

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.

He was referring to Republic Act (RA) No. 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.

“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,” he said.

“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 added. “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.”

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.

According to a report by the DOF-Domestic Finance Group (DFG), 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.

This would have increased our overall debt level to P15.4 trillion.

Examples of the bills included in the calculation of the DOF-DFG were the:

-Proposed value-added tax (VAT) exemptions for oil, liquified petroleum gas (LPG), electricity and other commodities and abolition of other taxes, such as those proposed by Representatives Ferdinand Gaite, Carlos Isagani Zarate, Eufemia Cullamat, Sergio Dagooc, Presley De Jesus, Adriano Ebcas, Arlene Brosas, Godofredo Guya, Alfred Vargas, and Vilma Santos Recto, as well as Senators Grace Poe, Ralph Recto, Juan Miguel Zubiri, Aquilino Pimentel III, Emmanuel Pacquiao and Francis Pangilinan;

-Various COVID-19 stimulus bills and subsidies, such as those proposed by Reps. Jose Ma. Clemente Salceda, Stella Luz Quimbo, Sharon Garin, Michael Edgar Aglipay, De Jesus, Guya and Dagooc, and Senator Imee Marcos;

-Proposed exclusion of the 13th month pay, performance-based bonus and other income from taxable income, such as those proposed by Representatives Santos Recto and Victor Yap; and

-Appropriations for new departments or government entities proposed by various legislators.