Economic managers: Don’t rush federalism shift

JULY 31, 2018 House of Representatives begin the the proposed P3.757-trillion national budget in a briefing at the Congress in Batasan, Quezon City. Sec. Ernesto Pernia, NEDA. INQUIRER PHOTO/ JAM STA ROSA

The country’s chief economist and the head of the Duterte administration’s economic team both cautioned on Tuesday against rushing the planned change in the form of government to federalism, citing some unclear provisions, especially on fiscal management.

During the Senate finance committee hearing on the proposed P3.757-trillion 2019 national budget, Senator Sherwin Gatchalian asked Socioeconomic Planning Secretary Ernesto M. Pernia to elaborate on recent reports quoting him as saying that shifting to federalism could wreak havoc on the fiscal situation.

Pernia, who heads the state planning agency National Economic and Development Authority, clarified that it was “a personal opinion.”

“As I’ve said, I do not object. I was just pointing out that the rush is not good,” the Neda chief added.

For his part, Finance Secretary Carlos G. Dominguez III said that the economic team does not have an official position on the issue, but he was personally “happy that it is being discussed now.”

However, as overseer of the country’s finances, Dominguez had reservations on the fiscal provisions of the original draft federal constitution.

“During a meeting with the members of the [consultative committee], I asked them who is going to pay for the national debt? Who is going to pay for the military? Who is going to pay for the Department of Foreign Affairs and the central bank, and if it needs additional capital who is going to put that up? And the response was that the sharing with the LGUs [local government units] of the states will be after those expenses,” Dominguez said.

“I said, ‘you know when I read the draft it doesn’t say so there—it just said 50 percent.’ So I said, ‘you know, that’s what you say, but how come it’s not in the draft?’” Dominguez added.

“So I think there are a lot of issues that need to be worked out, and it’s good that it’s being discussed publicly right now, and that’s just one of the issues that we see from the fiscal point of view,” according to Dominguez.

For Dominguez, “Ernie [Pernia] is right—if we don’t manage this correctly, this can end up to be a fiscal nightmare.”

In January, Dominguez already warned that a federal form of government “will be challenging, very challenging because the tendency [will be for] different federal states to retain as much revenue as they can and give the national government as much expenses.”

“There’s potential for it to become a nightmare. We are watching it very closely, particularly the revenue-sharing schemes that are going to be put forward for the [proposed] federal government,” Dominguez had said. /je