Government prepared to hike borrowings

MANILA, Philippines — The government is ready to increase the country’s debt level to help cushion the impact of the coronavirus disease 2019  or COVID-19, according to the Department of Finance (DOF).

At the same time, the DOF expects the country’s fiscal deficit to reach a level higher than initially estimated.

In a video conference with reporters yesterday, Finance Secretary Carlos Dominguez said the country’s deficit level may breach four percent of  gross domestic product (GDP) this year, higher than the initial estimate of 3.6 percent due to the outbreak.

However, he said the figure would still depend on how long the contagion would last.

“I don’t want to give any specific numbers right now because I don’t know how low the tax collections will go. I don’t know how much more exactly we will spend. But certainly, close to probably a little more than four percent of GDP would be a reasonable number right now,” Dominguez said.

“But I don’t want to make that prediction. We are like in a battle. The first part of the battle, we must take care of the essentials and then as the battle develops, we will take a look at the damage to the economy and that’s the time when we will plan on what we will do for the stimulus program,” he said.

Citing estimates by the Development Budget Coordination Committee (DBCC), the finance chief said the outbreak may  cut  revenues by as much as P286.4 billion if economic growth settles at zero percent this year.

“Those are roughly the numbers, but at this point in time we don’t even have a very good estimate of what the GDP is going to look like. According to NEDA, it can be -0.66 percent to 4.3 percent. For sure, almost sure, the revenues from fuel will be down by about P14 billion because of the combination of drop in demand and prices,” he said.

Despite this, Dominguez said the government still has no plan to cut its expenditure program.

Due to the expected drop in revenues, Dominguez said the government would need to increase its debt level this year. As of end-2019, the Philippines debt-to-GDP ratio stood at  41.5 percent.

“Because our revenue is down, we will have to borrow to cover that. That is our primary task,” he said.

Dominguez said  the government is prepared to borrow as much as required, although not providing any specific figures.

“We at the DOF are also looking for funds, both grants and loans to make sure that we are in a good position. The question of how much are we willing to borrow, I tell you we are willing to do as much as it takes, but at this point I don’t have the exact number,” he said.

Dominguez said the DOF is negotiating with multilateral agencies, including the World Bank, Asian Development Bank and Asian Infrastructure Investment Bank for a $1 billion funding support.

In the meantime, the finance chief said the Bangko Sentral ng Pilipinas’ decision to cut banks’ reserve requirement ratio and plan to purchase P300 billion government securities will provide the much-needed liquidity and resources to fund efforts to contain the spread of the coronavirus disease 2019 or COVID-19.

The executive department also asked Congress to grant President Duterte the authority to realign the 2020 budget and some off-budget funds.

He said the Social Security System and Government Service Insurance System are also continuously supporting the stock market by increasing their purchases.

“I think so far they have already put almost a billion pesos in the stock market and the results have been that yesterday and today, the stock markets have firmed up. I understand this morning they have opened up at four percent. It showed that government institutions have confidence in the stock market and are providing liquidity and a willing buyer,” Dominguez said.