Dominguez unspools reservation on proposal to pass law capping debt

Finance Secretary Carlos G. Dominguez III expressed reluctance to embrace a proposal made by Senate President Pro Tempore Ralph Recto to put a cap on government borrowing.

“I think he wants to promote fiscal responsibility,” Dominguez said of Recto’s proposal. “However, for me, if you put a lot of inflexibilities in the system who knows what will happen in the future?” he added, admitting he hasn’t discussed his thoughts with Recto.

Dominguez said the government’s hands should not be tied. “We may have to borrow more and then you have that inflexibility,” the finance chief told reporters at the sidelines of the opening of the 18th Congress on Monday (July 22).

Last week, Recto said his proposal would put a ceiling on government debts—not more than 50 percent of gross domestic product.

“The important thing is not the amount—the important thing is also the terms,” Dominguez said.

“Supposing it’s at 50 percent [of GDP] but everything is maturing next year, so what’s the point? So it’s also the tenor. Also how you’re going to use it,” Dominguez added.

He said he was “pro-fiscal responsibility.” Putting a cap on borrowing, he said, was “one way to do it” but one that could tie the hands of even future administrations.

He said he would discuss with Recto how to “arrive at the same goal” of fiscal responsibility ‘but I’m not sure limiting (debts) is the only way to do it.”

In 2018, the debt-to-GDP ratio stood at 41.9 percent and the government had wanted to bring the share of debt to the economy to 38.6 percent by 2022.

Last week, the Cabinet-level interagency Development Budget Coordination Committee (DBCC) programmed the government’s gross borrowing to peak to a record-high of P1.4 trillion next year to finance the programmed wider budget-deficit cap equivalent to 3.2 percent of GDP.

Even as the government’s borrowings rose further, the debt-to-GDP ratio was expected to be steady at 41.4 percent this year and next year.

The national government’s outstanding debt in nominal terms hit a new high of nearly P8 trillion as of end-May./TSB