PH debt-to-GDP ratio “not worrisome”: Diokno
The Philippines debt-to-gross-domestic-product (GDP) ratio is “not worrisome”, Finance Secretary Benjamin Diokno told a House hearing on the 2024 proposed budget on Thursday.
Albay Rep. Edcel Lagman asked Diokno whether he supported President Ferdinand Marcos, Jr.'s speech at the US-ASEAN Business Forum that ''we worry about our debt-to-GDP ratio in the Philippines, as it stands at about 63 percent and that’s a little high for us and it is not ideal.''
National Treasurer Rosalia de Leon said the debt-to-GDP ratio was 60.9 percent compared to their target of 62 percent of GDP, while it stood at 61 percent in the first quarter of 2023.
“It’s not worrisome, your honor,” Diokno asserted.
“The rule of thumb, your honor, before the (COVID-19) crisis, was that if your debt-to-GDP ratio is 60 percent you’re okay. Remember, before the pandemic, your honor, our debt to GDP ratio was only in the neighborhood of 40 percent, more or less. And we have to borrow money because of the pandemic and it went up to around 62 percent. But that’s still manageable,” he added.
“Right now, because of the pandemic, I would say the new rule of thumb should be around 70 percent,” he said.
For her part, Budget Secretary Amenah Pangandaman said that the projected fiscal deficit next year was 5.1 percent.
“Is there a way by which we can decrease the fiscal deficit?” Lagman asked
Diokno said that it was possible to reduce the fiscal deficit but the government may have to “sacrifice” some of its programs.
“We want to spend five to six percent of our capital formation for infrastructure. So if you force us to reduce it to say, three percent, then we will have to cut back on our social programs and fiscal infrastructure programs,” he said.
“I am not suggesting that, Mr. Secretary. What I am suggesting is we can reduce that without sacrificing our expenditures,” Lagman replied.
He then referred to a time when the Bangko Sentral ng Pilipinas (BSP) lent the national government an interest-free loan to support its budget.
Diokno said that under his term as governor of the BSP, the bank loaned the government P540 billion without interest during the height of the pandemic.
“But that’s allowed because the new charter of the central bank says ‘under extraordinary circumstances’. And the pandemic was extraordinary,” he answered.
“And there is no justification to follow that budgetary support from Banko Sentral for the next fiscal year, considering that we have a huge fiscal deficit?” Lagman asked.
Diokno responded: “No, your honor. I think that things have normalized. I think it’s also not fair for central bank because they really have to maintain their independence on the fiscal side.”
“If I were governor of the central bank I would not lend money to the national government at this time,” he said.
Lagman asked if the government could use the excess funds of government-owned and controlled corporations to help reduce the fiscal deficit.
“If you want to reduce the deficit, there are three ways of doing it: One, you cut expenditures. Number two, you increase taxes. Number three, you change the way you collect taxes. For example, through digitalization. That’s an area where you can improve tax collection. Or change the way of governing. For example you can maybe you can address the problem of the military pension reform,” Diokno said. Jaspearl Tan/DMS
