A LOWER SHARE of debt relative to the 2018 budget will allow the government more fiscal space to back projects that are “more productive,” economic managers said yesterday.

The Development Budget Coordinating Committee briefed Senators yesterday on macroeconomic conditions amid the start of deliberations on the P3.767-trillion budget.

The Senate committee on finance is scheduled to discuss the proposed budget of the Department of Justice and Department of Foreign Affairs today.

“Interest payments and net lending will continue to fall, with its 2018 share to be lower at 9.8%, compared to 10.5% last year. This will allow the budget to be used to the more productive sectors,” Budget Secretary Benjamin E. Diokno said yesterday.

Mr. Diokno added that the growth in debt payments to P370.8 billion next year is slower at 5.5%, from the 10% uptick to P351.6 billion in the 2017 budget.

Interest payments have a P354.01 billion allocation in the proposed budget, 5.7% greater than the P334.87 billion this year, while net lending is expected to be little changed, growing only 0.2% to P16.8 billion.

Mr. Diokno said this situation enables allocations for economic services — which include infrastructure and other capital outlays — to rise by 25%, outpacing the 7.3% growth in social services spending.

Although social services still take up the largest share of the budget at 38.5%, or P1.45 trillion, economic services are at 30.6%, or P1.15 trillion.

The country’s rapid gross domestic product (GDP) growth will continue to overtake the growth in outstanding debt, which is expected to hit nearly P7 trillion next year.

“This budget strategy is sound, is appropriate, and sustainable as the debt-to-gross domestic product will continue to fall as we accept that GDP growth will outpace the rise in debt accumulation,” said Mr. Diokno.

The government targets a 37.7% debt-to-GDP ratio in 2018, from the current 40.6%.

Finance Secretary Carlos G. Dominguez III said that the government’s fiscal position will continue to be sustainable, noting that the tax take has been expanding over the recent years.

“Tax effort will be increased to 15.3% of GDP in 2018 to be able to finance needed social expenditures,” Mr. Dominguez said during the hearing, noting that he targets a 17% ratio by the time the administration’s term ends in 2022. The 2016 level was 13.7%.

Factored into the budget is the additional revenue expected from the tax reform program — where P133.8 billion will be generated in the first year — even though it has yet to be approved by the Senate. Mr. Dominguez said during the hearing that without the measure, the government would not be able to afford half of its P8.4-trillion infrastructure program over the medium term.

The government targets 6.5-7.5% GDP growth this year and 7-8% in 2018 to 2022.

Bangko Sentral ng Pilipinas Governor Nestor A. Espenilla said that despite the rapid expansion of the country’s economy, inflation remains within its 2-4% medium term inflation target.

“GDP growth remains resilient, driven by strong domestic demand and manageable inflation… Inflation is likely to settle near the midpoint of the government target range,” said Mr. Espenilla.

Socioeconomic Planning Secretary Ernesto M. Pernia said that “while the macroeconomy appears robust, inequality across households and regions remains and chronic poverty persists.”

Mr. Pernia said the government aims to diminish poverty incidence from the current 21.6% to 14% in 2022, with the unemployment rate projected to decline to 3% from 5.7% by the end of the administration’s term. — Elijah Joseph C. Tubayan

RELATED ARTICLESMORE FROM AUTHOR