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Country risks fiscal crisis with virus fight

We are barely investment grade right now. If we suffer a downgrade, institutional investors will have a hard time buying our bonds, and that can’t be good for financing Covid-19 measures.

Michelle R. Guillang

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The Philippines is “treading on dangerous ground” with a budget deficit, economist-lawmaker Albay Rep. Joey Salceda said as he emphasized the need to look for other options for sourcing revenue rather than depend on “new borrowing.”

“Remember, we are barely investment grade right now. If we suffer a downgrade, institutional investors will have a hard time buying our bonds, and that can’t be good for financing Covid-19 measures,” he said Sunday night.

He noted that Covid-19 spending will leave a mark on long-term fiscal sustainability — the reason why the government needs to engage in long-term fiscal reforms.

Due to this deficit spending, funding military or private pension will be “critical”, he said.

“We have to find ways to make them sustainable, along with our Covid-19, so that we can prevent a fiscal crisis in the future. I am championing reform bills in these areas so we can act before it’s too late,” he stressed.

The House Ways and Means chair last Friday proposed to economic managers an increase in dividend remittances from government-owned and -controlled corporations (GOCC), among other measures, to fund more household emergency subsidies and other forms of cash assistance for the pandemic-hit Filipinos.

“The DoF (Department of Finance) agreed with this proposal, and it more or less think my estimate of P70 billion in additional revenues from GOCC remittances are reasonable,” he shared.

“We can’t expand the deficit without consequences for the future. That much is clear. So, we have to be creative with our ways of funding Covid-19 relief,” he added.

The lawmaker also suggested other options for sourcing revenue.

“We will have to survey non-essential GOCC that have accumulated more earnings than they need. Depending on which GOCC we withdraw capital from, that could be anywhere between P20 to 80 billion,” he pointed out.

“Nothing changes as far as the ownership structure of the GOCC is concerned, but we get to mobilize dormant resources,” Salceda said.

Another option, he suggested, is to enact pending tax-related bills which the Lower House has passed, particularly the measures that deal with Philippine Offshore Gaming Operators (POGO) and e-sabong (cockfighting).

“They are operational, but the tax regime is uncertain, so we’re not getting the most out of these. That will yield a combined P40 to 52 billion over the next five years,” he claimed.

As House Tax chair, he projected that some P675 billion worth of revenue measures are either about to be passed, or already passed by the House of Representatives.

He stressed that both the Bureau of Local Government Finance and the Municipal Development Fund Office need to be “aggressive with teaching underleveraged” local government units (LGU) in obtaining loans.

“The national government only gets 60 percent of all revenues and gives LGU 40 percent, but we pay 100 percent of the Covid-19 debt. That’s an allocation problem that can be better addressed,” he underscored.

“The point I made is we have to think outside the box because the space in the fiscal box is getting smaller. We already have some good ideas, and I will continue to work with the economic managers.

“My commitment to the people is to find creative ways to fund more emergency subsidies. Our people are in sore need of a lifeline.

“I am working with the economic managers, headed by Secretary Sonny Dominguez, because we have to keep the conversation productive. It would be unproductive to pitch unfundable stimulus bills, or propose that we bloat the deficit more than we can,” Salceda said.

 

 

 

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