Teachers’ salary hike puts Philippine fiscal health, credit grade at risk

MANILA, Philippines — A proposal to double the salaries of public school teachers could adversely impact the country’s fiscal position and result in a credit rating downgrade, according to the Department of Budget and Management (DBM).

In a press briefing, Budget Secretary Benjamin Diokno said doubling the pay of some 880,000 public school teachers may require the government to raise the budget by P343.7 billion, doubling the personnel services cost for the teaching position to P724.8 billion from the current P381.1 billion.

Diokno said financing the additional P343.7 billion may require raising the country’s fiscal deficit to five percent of gross domestic product (GDP) from the current ceiling of three percent, thus risking the government’s excellent financial position.

“We may be risking a credit rating downgrade as a result of this unmanageable public sector deficit,” Diokno said.

“A downgrade means, we will face higher interest rate in the future and greater debt service payments when borrowing from international financial insitutions. In other words, such policy will endanger our prudent medium term fiscal policy,” he said.

Alternatively, Secretary Diokno said the government may instead raise more taxes or reduce other government expenditures in order to double the salaries of teachers.

However, the budget chief warned raising P343.7 billion in revenue would be a “monumental task.”

“Consider that Package 1A of TRAIN is expected to deliver about P90 billion in revenue, yet this is only about one-fourth the amount needed to finance the doubling of salaries of teachers,” Diokno said.

He added the government cannot risk sacrificing other budget priorities, such as the infrastructure program, free college tuition, Marawi rehabilitation and the cash transfer programs, among others.

Despite such warnings, Diokno categorically stated yesterday that he is not opposed to increasing the salary of teachers.

“I understand the crucial role teachers have in nation-building and I do believe they should be rewarded accordingly,” he said.

Additionally, Diokno said the the take-home pay of teachers has already increased and would continue to increase with the implementation of the Salary Standardization Law (SSL) until 2019. The Tax Reform for Acceleration and Inclusion Act (TRAIN) has also increased their take-home salaries, he added.