Government plans to borrow record P6 trillion until 2021

MANILA, Philippines —  The government plans to borrow a record P6 trillion from domestic and foreign lenders this year and next as it expects the fiscal deficit to widen further amid the coronavirus  pandemic, according to Finance Secretary Carlos Dominguez.

In a press briefing yesterday, Dominguez said borrowings for 2020 and 2021 are expected to reach P3 trillion, the bulk of which will be sourced from domestic lenders.

“For 2021, we expect to borrow roughly P3 trillion, roughly the same as what we will borrow in 2020,” Dominguez said, adding that the financing mix will be around 75:25, in favor of domestic sources.

The new 2020 borrowing program is higher than the original target of P1.4 trillion set by the Bureau of the Treasury (BTr) before the   pandemic hit the country.

For 2022, borrowings may go down to P2.3 trillion, Dominguez said.

The government is ramping up its borrowings to bridge the expected deficit in its budget, which the Development Budget Coordination Committee (DBCC) expects to widen further in the medium term.

For 2020, DBCC said the budget shortfall may  reach P1.82 trillion or 9.6 percent of gross domestic product, higher than the previous estimate of 8.4 percent of GDP announced last May.

The deficit figure was revised upward as the inter-agency body sees revenues may fall deeper, while disbursements are projected to increase due to the various stimulus packages being pushed in Congress to recover from the pandemic.

In particular, the DBCC said the revenue program for 2020 was adjusted to P2.52 trillion from the P2.61 trillion projection in  May.

“The decline is a result of deeper contraction in real GDP growth and the P42 billion in estimated foregone revenues from the implementation of the proposed Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act,” the DBCC said.

The CREATE bill pushes for the immediate five-percentage point reduction in the corporate income tax to 25 percent from 30 percent to provide relief to the business sector.

According to estimates from the Department of Finance (DOF), the bill is expected to cost the government P42 billion in foregone revenues in the second half alone. Over the next five years, this is expected to reach P625 billion.

On the other hand,  DBCC said the estimated disbursements for this year inched up by P110 billion to P4.34 trillion, equivalent to 23 percent of GDP.

“The additional spending anticipates the P140 billion additional appropriations for the proposed Bayanihan to Recover as One (Bayanihan II) Act which is being pursued in Congress,” the DBCC said.

For 2021, revenues are projected to slightly recover to P2.72 trillion, equivalent to 13.2 percent of the GDP. This is, however, lower than the previous estimate of P2.93 trillion.

Disbursements are expected to increase to P4.47 trillion or 21.6 percent of GDP, higher than the previous program of P4.36 trillion.

As a result, the budget deficit next year is expected to widen to 8.5 percent of GDP in 2021 from the initial forecast of 6.6 percent.

For 2022, revenue and disbursement projections are estimated at P3.03 trillion, and P4.68 trillion, respectively, translating to a 7.2 percent fiscal deficit.

“Despite these adjustments in deficit spending, the DBCC is confident that the national government’s debt will be kept at a sustainable and responsible level, within the 60 percent internationally-recommended debt threshold, by 2022,” economic managers said.

Earlier, the Bureau of the Treasury (BTr) reported that the national government’s outstanding debt as of end-June reached a new record high of P9.054 trillion, 1.8 percent up from the P8.89 trillion recorded in the previous month.

BTr data also showed that gross borrowings have already reached P1.72 trillion in the first half fo the year alone.