Gov’t urged to step up revenue collection efforts to meet debt servicing needs

The Philippines and other emerging markets need to boost revenue collections to repay their ballooning public debt, the Washington-based Institute of International Finance (IIF) said.

While the global debt pile eased by about $1.7 trillion to $289 trillion in the first quarter of 2021, the IIF said in a May 13 report that $11 trillion were added to emerging markets’ total debt from prepandemic levels to $86 trillion in March.

“Pandemic-related spending increases and revenue losses have made debt service a greater burden for many emerging markets, including the Philippines, South Africa, India, Indonesia and Turkey,” the IIF said in its Global Debt Monitor titled “Chipping away at the mountain?”

The IIF said its estimates and those of the International Monetary Fund (IMF) showed that the Philippine government’s interest expense/revenue ratios would likely rise by about 5.5 percentage points between the periods 2018-2019 and 2021-2022.

No tax hike

“For many emerging markets, much-needed improvements in domestic tax regimes could help boost revenue capacity. However, heightened political and social tensions as the pandemic wears on could limit governments’ willingness to deliver structural tax reforms,” it noted.

IIF data also showed that household debt in the Philippines rose to 16.9 percent of gross domestic product (GDP) as of the first quarter from 16 percent a year ago; that of nonfinancial corporations climbed to 33.5 percent of GDP from 31.8 percent, while that of the financial sector was up to 11.9 percent of GDP from 11.4 percent.

Finance Secretary Carlos Dominguez III earlier said there would be no tax hike up to the end of President Duterte’s term in mid-2022, even as the national government ramped up borrowings to boost its COVID-19 response war chest.

Dominguez had said the government was planning to start winding down debt next year through revenue measures such as privatization of mining assets, jacking up state-run corporations’ mandatory dividend remittances to the national treasury, and the passage of the pending—although revenue-neutral—tax reform bills.

This year’s programmed P3.03-trillion gross borrowings would increase the debt-to-GDP ratio to a new high of 57.8 percent by end-2021 or an outstanding record amount of some P11.5 trillion. —Ben O. de Vera