PH’s heavy debt load
The Bureau of the Treasury reported recently that the total national debt as of the end of May hit a new high of P11.07 trillion.
Of that debt, more than 71 percent are from domestic borrowings and the rest are from international lending institutions.
With regard to the latter, the government borrowed $500 million from World Bank, $400 million from Asian Development Bank and $300 million from Asian Infrastructure Investment Bank to fund the purchase of COVID-19 vaccines and other related activities.
Corollary to this financial situation, Finance Secretary Carlos Dominquez III said in a Cabinet meeting the country’s budget deficit in 2020 rose to P1.37 trillion and was estimated to reach P1.86 trillion this year
He assured, however, that despite the high national debt level, it was still manageable.
The government cannot be faulted for going into serious debt to procure the vaccines needed to arrest the spread of the virus that has caused economic havoc to the world and, in the case of the Philippines, a recession in 29 years.
The vaccines are needed to achieve herd immunity, which means inoculating at least 70 million out of 109 million Filipinos.
Until that magic number is reached (which to date remains a big question mark), the recovery of the economy to prepandemic level would be tortious.
There is nothing wrong with a country incurring huge debts as long as the proceeds are used to develop the economy and improve the lives of its citizens. But it is grossly unacceptable if the funds are applied to projects with scant social or economic value, or to pay the costs of satisfying the ego of government officials.
From now until June 30, 2022, the payment of national debts would not be in the economic managers’ priority list. That would be the problem of the next administration.
Depending on the grace periods of the foreign loans, for example, it would only be after two or three years, or in the middle of the term of whoever would succeed President Duterte, that those debts have to be repaid.
Ahead of that payment obligation, the new president has to raise the needed funds by improving tax collection efforts or asking Congress to enact new taxes, or both. And if these measures are insufficient, reduce the budgetary allocations for essential public services.
In effect, the burden of paying those loans would have to be shouldered by the taxpayers, with the public having to make do with whatever public funds may remain after satisfying those debt obligations.
Unless the economic managers of the next administration can come up with new ideas to perk up the economy or reduce the debt burden, some unborn Filipinos may already be in hock for those obligations.
Looking back, those huge debts may not have to be incurred or, if at all, in lesser amounts, had the government acted quickly in preventing the spread of the virus to the country when its existence became known.
Recall that as early as January last year, there were already reports about the outbreak of the virus in Wuhan, China.
Despite repeated calls by some lawmakers and health professionals to bar Chinese nationals, especially those coming from that region, from entering the Philippines, the government allowed their entry on the occasion of the Lunar New Year celebration.
The government turned a deaf ear to that suggestion lest it “hurt the feelings” of the Chinese government with whom the Philippines supposedly enjoys cordial relations. Never mind if China had unlawfully encroached (and continues to do so) on Philippine territory in the West Philippine Sea.
Fast forward, in consideration for not making China feel bad about restricting the entry of its nationals and the thousands of pesos spent by Chinese tourists, the Philippines had to incur huge domestic and foreign debts to battle a once-in-a-century pandemic.
It was a lousy trade-off whichever way you look at it.
Whether or not the P11.07 trillion national debt is, as Dominguez claims, manageable remains to be seen. Their payment may no longer be his concern when the creditors start calling.
For comments, please send your email to [email protected].
