The government is poised to increase its infrastructure-spending program next year by P60 billion—and is considering raising the budget deficit ceiling as a consequence—to meet the expenditure needs in the aftermath of the latest natural calamity.
In particular, economic officials intend to raise the proposed budget for infrastructure for 2014 from the original P360 billion to P420 billion, or from 3 percent to 3.5 percent of the country’s projected gross domestic product (GDP).
Economic Planning Secretary Arsenio Balisacan said the additional budget for infrastructure could be made possible mainly by shifting portions of the budget allocations for less important expenditure requirements.
However, he said the government was also open to raising its expenditure and budget-deficit ceilings for 2014 if doing so would be deemed necessary.
Under the original fiscal program for 2014, the government was to work on a P2.268-trillion national budget and incur a deficit not exceeding P266.2 billion.
Balisacan, who is also director general of the National Economic and Development Authority (Neda), said rehabilitation and reconstruction of areas devastated by supertyphoon “Yolanda” was expected to be “very costly.” As such, he said, substantial additional funding was necessary.
Nonetheless, the country’s chief economist said raising money to rebuild the affected areas would not be a major problem because the relatively favorable fiscal position of the government would allow it to incur a higher budget deficit without getting penalized by the financial markets through higher interest rates.
“If we have to raise the budget-deficit [ceiling], that will not be a problem and the markets will understand that,” Balisacan told reporters Friday at the sidelines of the annual meeting of the Philippine Economic Society.
Balisacan said the creditworthiness of the Philippines, which earlier this year got its first investment grades from major international credit watchdogs, was not expected to be dragged by the latest calamity.
He said foreign creditors, led by multilateral agencies, were in fact willing to extend highly concessional loans to help fund the country’s rehabilitation and reconstruction requirements.
The Philippine government has been able to reduce the proportion of its outstanding debt to the country’s GDP over the years on the back of various tax and administrative reform measures.
From a peak of more than 70 percent in 2004, the government’s debt-to-GDP ratio had fallen year after year to just 50 percent in 2012.
Given this backdrop, Balisacan said the Philippines would not find it difficult to access the international financial market for funds.
Meantime, Balisacan said economic agencies of the government were already in the process of developing a rehabilitation and reconstruction plan for areas affected by “Yolanda,” particularly those in the Visayas regions.