ADB urges members to focus on deficit reduction target

The Asian Development Bank has urged governments of the Philippines and other member-countries to stay on track of their deficit-reduction goals even as they pursue measures to pump-prime their economies.

The ADB said it was important for countries to sustain decent economic growth rates on one hand, but it was also necessary for them to keep healthy fiscal positions, on the other.

Rising debt ratios, which may be brought about by higher deficit spending by governments, will have adverse economic consequences, the ADB said. “Countries must, therefore, stimulate economies in a manner that takes into account the need to reduce their deficits.”

Increases in debt ratios could eventually turn off investors, whose investments are necessary for job generation, economists said.

“Growth-supportive expenditure policies can be achieved without undermining fiscal positions,” ADB said a recent report.

To attain the twin goals of posting faster growth and keeping fiscal position sound, it said governments could shift a significant portion of their budgets to growth-stimulating items, such as social services, education and infrastructure.

Another strategy would be to match higher spending with increase in revenue collection.

ADB said it was important for governments to continue stimulating their economies given the still serious problem of income inequality.

To have more people lifted out of poverty and to better spread the benefits of economic growth, ADB said, governments must spend on programs that would directly benefit low-income earners.

In the case of the Philippines, the ADB is supporting further increases in the funds for the government’s conditional cash transfer (CCT) program. Under this program, the government provides food subsidies to households that are considered among the poorest in the country.—Michelle V. Remo