TOTAL government spending went up by 11 percent to P4.206 trillion last year as the state was forced to allot more money to cushion the impact of the Covid-19 pandemic.
Citing preliminary figures from the Bureau of the Treasury (BTr), Finance Secretary Carlos G. Dominguez III on Tuesday said the amount disbursed by the government last year is already above the P3.798 trillion that the government spent in 2019.
“This includes the spending mandated under Bayanihan 1 and 2, as well as the continuation of the key infrastructure projects we are banking on to support economic recovery. The total expenditure is 11 percent higher compared to the 2019 level,” Dominguez said in remarks at the 72nd Inaugural Meeting of the Management Association of the Philippines (MAP).
Deficit spending
In the same speech, Dominguez revealed that the country’s emerging deficit spending last year amounted to P1.36 trillion or equivalent to 7.5 percent of the government’s projected GDP for 2020.
This is slightly below the government’s projected budget deficit for the year at P1.38 trillion or 7.6 percent of GDP, but is more than double the country’s budget deficit in 2019, which only stood at 3.4 percent of GDP or P660.2 billion.
“Because none of the emergency spending for the health crisis was programmed, we needed to bridge the budget gap with additional borrowings,” Dominguez said.
The finance chief said revenues fell to P2.84 trillion last year, which is 0.46 percent short of its revised P2.853-trillion total collection outlook for the year and lower by 9 percent from P3.138 trillion in 2019. It is also a drop of 19 percent from their original target of P3.49 trillion before the crisis struck.
For 2020, Dominguez said they projected the country’s debt-to-GDP ratio to reach 53.5 percent.
This is significantly higher than their prepandemic target of 40.2 percent and the country’s actual debt-to-GDP ratio in 2019 which fell at a historic low at 39.6 percent.
But Dominguez said the projected debt-to-GDP ratio of the country for last year “kept us well within the prescribed bounds of fiscal viability.”
For this year, Dominguez said they expect the national government’s debt to settle at 57 percent of GDP as the country aims to borrow a total of P3.03 trillion, roughly the same amount it borrowed in 2020.
“Even with the upscaling of our borrowing plan, we will still be able to keep our debt ratio within a sustainable threshold. This gives us the advantage over economies who were already saddled with heavy debt prior to the crisis,” Dominguez said.
The finance chief also said total gross financing raised by the national government last year reached P2.63 trillion, excluding the P540-billion emergency short-term loan from the Bangko Sentral ng Pilipinas, which was already paid in full in December and re-availed by the national government this month.
Preliminary figures from the BTr cited by Dominguez also showed 73 percent or P1.91 trillion of the total borrowings was raised from the domestic market.
The remaining amount was sourced from official development assistance (P403.1 billion) and global bonds (P318.1 billion).
“We appreciate the importance of continuing fiscal discipline to ensure the resilience of our economy. The public health emergency could last for months or possibly years. The battle against Covid-19 is going to be a marathon, not a sprint. While we hope for the best, we must be prepared for the worst,” he said. “Let me assure you that the Duterte administration has ample ammunition to outlast this enemy.”
Image credits: Bernard Testa, AP