Government decision makers should orient their policies toward securing the public health and the economic wellbeing of Filipinos and postpone the ambition of improving the country’s debt rating for a more opportune time.
Thus said the chief of the Bangko Sentral ng Pilipinas (BSP) who said on Monday (May 11) that Filipinos should prepare to build a “new economy” that is “better, safer, and more technologically ready.”
“The political leadership and the economic managers should focus on saving lives, saving livelihoods and saving jobs,” BSP Governor Benjamin Diokno said in a statement to reporters. “The lofty goals of getting A-rating by 2022 and achieving upper middle income status this year can wait.”
International debt watcher Standard and Poor’s has pegged the Philippines’ credit rating at BBB+ since 2019 thanks to substantial improvements in the country’s fiscal sector, specifically the progressive reduction in the government’s debt levels over the last few years as a percentage of economic output.
However, the spending program now being envisioned by government to keep the economy moving in the wake of the coronavirus pandemic is seen to adversely impact this credit standing.
Diokno — a two-time Budget Secretary under the Estrada and Duterte administrations — explained that Congress authorized the President to rearrange priorities in the 2020 budget under the emergency powers granted to him recently.
“This led to the massive cash grants to some 18 million families,” he said. “Strictly speaking, there was no new appropriations. Hence, the impact of the fiscal stimulus is limited.”
He said, however, that the change in the composition of the budget from slow moving capital projects or budgetary assistance to government corporations, to quick-disbursing cash grants “makes some difference.”
“As the government moves into the next phase of the road to the new economy, it should focus on a quick disbursing, employment creating program,” the central bank chief said. “It needs a supplemental budget, the size of which can be decided upon by the President with the recommendation of his economic managers.”
Diokno explained that a 1 percentage point increase in the budget deficit would amount to P200 billion worth of new spending, while a 2 percentage point hike would amount to P400 billion of fiscal output.
“The Executive Department needs new spending authority,” he said. “It needs a supplemental budget.”
Diokno said that some of these funds can be used for emergency employment aimed at creating 2 million new jobs across the country’s 42,045 barangays, prorated based on the number of inhabitants per barangay and the level of unemployment per province or city.
“The nature of the job will be determined by the barangay chief,” he suggested, adding that the temporary workers may do greening projects like cleaning of rivers or tree planting; public works projects like road maintenance, fortifying sea walls or social housing; or health projects like contact tracing and maintenance work in COVID-19 facilities.
The workers will be paid 10 percent lower than the minimum wage rate in the region, and will work for eight hours a day, five days a week, for seven months, from June to December 2020, he said.
“The emergency employment is quick-disbursing and will have high multiplier effect,” Diokno said. “It is pro-poor and egalitarian. It gives the ordinary worker a greater sense of self respect since he works for the food on his table. By helping himself, the worker helps his fellowmen and society.”