THE PHILIPPINES’ debt of P12.7 trillion is still “reasonable,” a ranking Senator said, in the context of increased global borrowing during the pandemic.
The government was “responsible” in its borrowing, according to Senator Juan Edgardo M. Angara, who chairs the Senate Finance Committee, speaking in an interview with One News on Thursday. He said the administration did a “fair job” as it did not overstep the country’s bounds by borrowing “too much.”
“I think we’re still on the side of reasonable, a little bit over our predicted 60% (of gross domestic product)… but in times of pandemic, the boundaries move as well,” he added, noting that borrowing was inevitable considering the need to provide subsidies and implement stimulus programs.
The debt-to-GDP ratio was 63.5% as of the end of the first quarter, exceeding the 60% threshold considered by multilateral lenders to be manageable for developing economies.
The pre-pandemic level was 39.6% of GDP at the end of 2019.
Finance Secretary Carlos G. Dominguez III has said that the Philippines may need at least 10 years before its debt-to-GDP ratio returns to about 40%.
The senator said that with the right mix of policy and economic incentives for the private sector, recovery is assured and revenue increased.
As the budget grows every year, Mr. Angara said the challenge is to make revenue grow proportionally.
However, Mr. Angara said increasing taxes may not be the solution as the people are still suffering from the after-effects of the pandemic. “You want to grow your economy in this period. You want it to recover,” he said, “and increased taxation might be sending the wrong message during this time.”
Instead, he recommended making adjustments to government spending, noting that Congress will focus on funding essentials during the deliberations for the 2023 General Appropriations Act.
“I think that one way of looking at it is attacking the spending side, but you have to be more judicious I suppose in your expenditure so that those debts can be paid (to bring) public debt (to manageable levels),” Mr. Angara said. The Philippines should spend “on things which really benefit the people and which will pay dividends over the long term, so things like education, health, infrastructure. Those are the things which should not be compromised.”
“What matters more is how you spend that debt and whether it’s sustainable,” he added.
Economic managers target GDP growth of 7-8% this year.
Mr. Dominguez has said the Philippines needs to grow an average of 6% annually in the next six years to effectively reduce debt. — Alyssa Nicole O. Tan