DBCC to study IMF’s advice on budget deficit

MANILA, Philippines — Government economic managers are considering the “tough advice” from the International Monetary Fund (IMF) to adopt a lower budget deficit cap, but cautioned the move could derail the momentum of the massive infrastructure build up.

Finance Secretary Carlos Dominguez said the interagency Development Budget Coordination Committee (DBCC) would take into consideration IMF’s tough proposal to maintain the budget deficit at 2.4 percent of gross domestic product (GDP) for 2018 and 2019 to help keep inflationary pressures in check.

 “The recommendation will be discussed in the DBCC since this requires the collective efforts of its members,” he said.

At the moment, the fiscal deficit program was set at three percent of GDP this year, 3.2 percent for next year, and three percent from 2020 to 2022.

The finance chief said the government is proceeding full steam ahead in its infrastructure development program, allocating at least P8.4 trillion under the Build Build Build scheme.

 “Given deliberate improvements in our process, projects are in full steam to realize benefits envisioned in a timely manner. We do acknowledge that adjustments may be necessary to adequately respond to the changing macroeconomic landscape both internal and external,” he said.

Dominguez said the latest findings of the IMF the 2018 Article Mission further underscored the urgency and importance of pursuing, with greater vigor, the Duterte administration’s economic agenda for sustained high growth and financial inclusion.

 “There will be no letup in the government’s policy of aggressive spending on infrastructure and human capital development while maintaining fiscal prudence, in step with President Duterte’s vision of reducing poverty incidence to 14 percent and transforming the economy into an upper middle-income one by 2022,” he said.

Budget and Management Secretary Benjamin Diokno said there is merit to review the proposal of the IMF, but cautioned against the implication of abandoning certain infrastructure projects.

 “We will subject the IMF proposal to a thorough review. Reducing the budget deficit program to 2.4 percent of GDP is feasible. However, the implication of abandoning some of our big-ticket infrastructure projects is something we are not comfortable with,” Diokno said.

Diokno said the country’s fiscal policy would continue to be prudent, sustainable, and supportive of investments in public infrastructure and human capital development.

 “We are already gaining significant progress in our aim to accelerate infrastructure development to boost the country’s competitiveness and improve the quality of life of Filipinos. We do not intend to slide back,” the DBM chief said.

Economic managers said factors behind the elevated inflation this year are one-off and transitory, including the rise in global oil prices, the imposition of excise tax on sugar sweetened beverages and higher excise tax on tobacco, as well as supply-related problems for rice.