Philippines seeks to boost COVID-19 war chest to breach P1 trillion

Prinz Magtulis - Philstar.com
Philippines seeks to boost COVID-19 war chest to breach P1 trillion
Finance Secretary Carlos Dominguez III
STAR / File

MANILA, Philippines — With available funds still falling short, the Philippines is eyeing a war chest worth $23 billion— or P1.1 trillion— to fight the coronavirus disease-2019 (COVID-19) epidemic, a substantial amount to be bankrolled mostly by debts as the government takes advantage of its healthy fiscal space to respond to the health crisis.

Without going into specific programs to be funded, Finance Secretary Carlos Dominguez III told CNBC on Tuesday the bulk of funding which will be raised with the central bank, worth $16.4 billion, will go “to support the economy.”

Another $6 billion will fund programs for “the most vulnerable in our communities,” likely including the P200-billion social amelioration program that aims to aid 18 million poor families. A separate $650 million is being secured to assist the country’s front-liners, including health workers, to “support the battle against the virus.” 

Fund sourcing yet to be threshed out

In the interview, the finance chief, however, did not explain fully how the government plans to source cash for the programs, except to say that $5.7 billion of that will come from multilateral agencies such as the Asian Development Bank and China-led Asian Infrastructure Investment Bank (AIIB).

Sought for details, Finance Assistant Secretary Antonio Lambino told Philstar.com the finance department will “update as soon as the breakdown” on funding sources “can be shared.” Finance Assistant Secretary Ma. Teresa Habitan said in a separate phone interview details may be shared after negotiations with aid agencies are completed. 

What is clear, for now, however is that the government is busy fund raising to maximize its newly acquired powers to tinker with the budget and reallocate funds for COVID-19 response, without the need for Congress approval.

“We have no particulars at this time. We are just identifying the possible sources first,” Budget Secretary Wendel Avisado said in a text message on Tuesday.

But at P1.1-trillion in funding needs as Dominguez has said, the government is still coming up short of actual cash and would need to seek more sources. To date, the source of only about P625.39 billion has been determined.

The bulk of that amount will be borrowed, either from the central bank, multilateral agencies like ADB, or through bond issuances, a fact Dominguez has also indicated. “We are very active now on negotiations…first with ADB, and AIIB since they have the lowest interest rates for us. After filling this up, we will then most likely go to commercial markets,” he said.

With more debts coming in, the national government “will probably increase” its debt ratio to “slightly over 46%” of gross domestic product by year-end from 41.5% last year.

Sought for comment, Ruben Carlo Asuncion, chief economist at UnionBank of the Philippines, said a lower debt-to-GDP, a measure of how big of a burden are liabilities to the economy, “would have to be second priority” now after “an extraordinary response to an unprecedented global crisis.”

“The economy can be brought to life later on, but we simply cannot bring people back tolife again (people who die of COVID-19 and ones who will die because of hunger and leadership indecisiveness),” Asuncion said in a text message.

Michael Ricafort, economist at Rizal Commercial Banking Corp., agreed with Asuncion. “The increase in the country’s debt level that reflects sharp increase in government’s spending and budget deficit…would be similar to what is being done by many other countries…,” he said in a text message.

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