P7T for infra in next 6 years

THE DUTERTE administration is expected to have spent a total of P7 trillion in infrastructure projects over the next six years, thanks to higher deficit spending, but the country will also have improved its ability to pay back its debt, according to the Department of Budget and Management (DBM).

DBM director Rolando U. Toledo last Friday reiterated that Malacañang intended to make room for economic growth by raising the budget deficit to 3 percent of gross domestic product (GDP) in the next few years.

Toledo, who is acting chief of the DBM’s fiscal planning and reforms bureau, said such a ratio of over-budget expenses to the value of the domestic economy would be sustainable.

He was speaking at a forum organized by the not-for-profit group Center for Philippine Futuristics Studies and Management Inc., representing Budget Secretary Benjamin E. Diokno, who was invited but was unable to attend.

The new administration’s spending plans reverse the thrust of the Aquino administration to reduce deficit spending by just 2 percent of GDP.

Sustaining the deficit at 3 percent “will result to declining a debt-to-GDP ratio with sustained economic growth,” Toledo said.

“By the end of the Duterte administration’s term in 2022, the Filipino people will collectively share in the improved state of public infrastructure in the country and reap the real benefits of economic growth,” he added.

Toledo said that, to support the government’s fiscal sustainability, Malacañang would push for tax reforms—including measures that would offset the spending drive.

He said such measures could cover an expansion of the value-added tax (VAT) base without raising the rate from 12 percent, indexation of the oil excise taxes to inflation and rationalizing fiscal incentives for investors.

A country’s ability to pay back its debt is considered stronger as its obligations, compared to the size of its economy, goes lower.

Toledo said Malacañang was aiming for a debt-to-GDP ratio of 40.9 percent in 2017, which will be further reduced to 35.4 percent in 2022.

Last May, then Finance Secretary Cesar V. Purisima said the government’s overall debt as of end-2015 amounted to P4.8 trillion, equivalent to 36.3 percent of GDP.

Purisima said the ratio was 8 percentage points lower than the 44.3 percent share recorded in 2009. The 2015 figure was also the lowest since the earliest similarly comparable period of 1998, when it stood at 51.1 percent.

According to DBM’s Toledo, public infrastructure spending in 2017 alone would be 5.4 percent of GDP. Diokno himself has been quoted as saying the government planned to spend a record P890 million for hard infrastructure next year.

Toledo said the goal was to “make up for past neglect, to modernize the crumbling infrastructure, to create decent jobs and to propel the economy to a higher, sustainable growth path.”