Dominguez allays debt trap fears over infra plan

MANILA, Philippines - Economic managers yesterday reiterated the government is maintaining fiscal discipline so as not to fall into a debt trap as it pursues an ambitious infrastructure spending of up to P9 trillion under the “Build Build Build” program.

In a videotaped message to the Economic Journalists Association of the Philippines (EJAP) during its economic forum, Finance Secretary Carlos Dominguez said the proposed comprehensive tax reform program would serve as fiscal buffer for the massive infrastructure program of the Duterte administration.

“I assure you we will not compromise on fiscal discipline and court runaway debts to please populist demands,” Dominguez said.

Dominguez said the first package of the Tax Reform for Acceleration and Inclusion Act (TRAIN) is meant to provide the government with sufficient funds to maintain fiscal discipline while it invests heavily not only in infrastructure.

He added the proceeds of the TRAIN is also aimed at expanding access to social services such as health and education.

“It is important, to be sure, that the tax reform program be passed as soon as possible. Tax reform will give us the fiscal space to pursue the expansionary measures. Without the additional revenues the reform package will bring, we cannot fully pursue the infrastructure program,” he said.

Dominguez earlier warned failure to pass the TRAIN would “be bad for the government’s infra program as the projects would have to be whittled down by 30 to 40 percent” without tax reform.

Aside from ensuring the fiscal space needed for the government’s massive spending on infra and social services, Dominguez said the administration also has to deal with constraints such as the rehabilitation of Marawi City that is expected to cost P30 billion.

Furthermore, he added the new law mandating free tuition and other school fees for all public tertiary institutions still has no clear funding mechanism.

The finance chief said crucial reforms in the Bureaus of Internal Revenue (BIR) and of Customs (BOC) are also being  pursued, resulting in a 9.32 percent rise in BIR collection and 11.48 percent increase in customs revenue from January to July.

Dominguez said that one year into the administration’s term, opinion polls show that people “are as optimistic as they have ever been,” which, he said, is a “vote of confidence” in the leadership of President Duterte.

“We treat that as inspiration to work harder and deliver better,” he said. “We want to provide the governance our people deserve.”

Budget Secretary Benjamin Diokno told the forum participants the Duterte administration is embarking on expansionary fiscal policy to aid in the financing of the ambitious infrastructure program and massive investments in human capital development.

As such, he said the government is expanding its fiscal space including through higher deficit ceiling and proceeds of the tax reform program to P309 billion or 1.8 percent of gross domestic product (GDP) in 2018 to P524 billion or 2.1 percent of GDP in 2022.

He added the government would follow a borrowing mix of 80-20 in favor of domestic sources designed to minimize exposure to foreign exchange fluctuations and to better manage debt.