Debt should be used to strengthen industries

MANILA, Philippines — The government is urged to use its borrowings to fund and boost local industries, especially as the country’s debt level has breached the P14-trillion mark.

In its midyear briefing on Tuesday, research and advocacy group IBON Foundation argued that it is not anti-debt and that borrowing is not necessarily a bad thing as it could benefit the economy in the medium to long-term.

However, IBON executive director Sonny Africa said two main considerations should be addressed: the purpose and who is paying the debt.

“Borrowing per se is not really an issue. The problem is where you use it,” Africa said.

“It should not be for big-ticket infrastructure projects. Rather, our debts should strengthen local agriculture and build Filipino industries,” he said.

As of end-May, the country’s outstanding debt breached the P14-trillion mark and is now 96.35 percent of the P14.63 trillion expected debt pile by end of the year.

The government is expecting to surpass its debt assumption for the year, but insisted that such a level remains manageable as the economy grows and recovers from the pandemic.

Africa emphasized that the second point of the current debt problem is who is actually contributing to pay for the country’s obligations, which boils down to the tax system.

Africa reiterated that the best way to generate revenues is through wealth taxes, which the administration, unfortunately, is not inclined to implement.

“The government has been cutting corporate income taxes and is making up for the losses by increasing taxes on consumption products. And that means a bigger tax burden on poor Filipinos,” Africa said.

“For us, tax those who have the capacity to pay higher because it does not make economic sense to not tax them,” he said.

IBON has long been urging the government to raise substantial revenues without burdening ordinary Filipinos through a wealth tax that could raise some P500 billion annually.

“If most Filipinos are so poor to begin with and you are just trying to get your taxes from them, then you’re never going to generate enough taxes and you’ll still be on the debt level,” Africa said.

As the Marcos administration enters its second year in office, IBON called on the government to shift to untraditional socioeconomic reforms.

These include increasing the people’s purchasing power and short term doables such as progressive taxation and wealth taxes.