The Philippines: DoF warns vs incurring ‘unmanageable debt’

  • FINANCE Secretary Carlos G. Dominguez III said the government is keen on capping its budget deficit at 9% of gross domestic product (GDP) in 2020, warning against “spending too much above our means.”
  • “While the government is borrowing more than usual in order to fund healthcare, social protection and other essential programs while our revenues are down, we have to be careful about spending too much above our means,” Mr. Dominguez said.
  • State borrowings reached PHP1.22tr in Jan 20 to Apr 20, based on data from the Treasury, with PHP982bn coming from domestic lenders and PHP237bn from external sources.
  • The government borrowed PHP1.06tr in 2019. The Department of Finance (DoF) chief said the government is “careful not to borrow beyond sustainable levels, lest we fall into a vicious cycle of accumulating unmanageable debt, which might drastically increase our financing costs, and plunge us deeper into debt.”
  • Mr. Dominguez said “fiscal space should be saved” in case the pandemic worsens and forces the government to spend more on healthcare, subsidies and stimulus measures.
  • The economic team is pushing for a PHP180bn recovery plan, which includes PHP140bn in new spending under Bayanihan II bill and the proposal to cut corporate income tax to 25% in 2020.
  • Meanwhile, the government’s Economic Development and Infrastructure Cabinet clusters will hold a forum on 8 Jul 20 to discuss the country’s recovery plan ahead of President Rodrigo R. Duterte’s fifth State of the Nation Address on 27 Jul 20.

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