P91-B tax loss seen from COVID-19

The government will augment the estimated P91 billion in foregone revenues coming from COVID-19’s impact on trade and industries through additional borrowings, Finance Secretary Carlos Dominguez III said.

On Tuesday, Dominguez said that as a result of slower imports from China and sales of domestic businesses at the start of the year, the government’s projected below-target revenue take would widen this year’s budget deficit to as much as 3.6 percent of gross domestic product (GDP)—exceeding the program of 3.2 percent of GDP.

The government targets total tax and nontax collections to reach P3.5 trillion in 2020.

“The corresponding increase in the borrowing level will provide financing for the increased deficit. Our cre­dit-rating is quite robust and we don’t expect any difficulty in covering a potential deficit that might occur because of the expected drop in economic activity because of COVID-19,” Dominguez told a press briefing after the Economic Development Cluster meeting.

Dominguez said the wi­der budget deficit would be “financeable” given investment-grade credit ratings that made borrowings cheaper.

The government plans to borrow a record P1.4 trillion—75-percent domestic and 25-percent external—this year to finance the budget deficit.

Dominguez added that the government would not scrimp on spending on public goods and services, which had been programmed to reach P4.2 trillion this year.

He said the government would continue rolling out massive infrastructure projects under the ambitious “Build, Build, Build” program.

“We will keep the expenditure budget where it is even as revenues are going down,” Dominguez said.

National Treasurer Rosalia de Leon told the Inquirer on Wednesday that the additional borrowings to offset the lag in revenue collections “could be funded from onshore and external borrowings, including commercial issuances.”

De Leon said the timing for these borrowings would “depend on market conditions.”

The Bureau of the Treasury has temporarily deferred its planned issuance of renminbi-denominated panda bonds in March even as demand for government securities in the onshore market remained robust.

Since February, 66 firms mostly in the tourism and manufacturing sectors either temporarily closed down or implemen­ted flexible work arrangements as the coronavirus outbreak slowed tourist arrivals and delayed raw material imports subjected to quarantine.

But on Wednesday, Dominguez said he received word from one of the major port operators that the container import volume from China was “starting to move back up” in early March.

The Department of Finance had reported that the volume of imported goods from China dropped 44 percent year-on-year in February.