By Elijah Joseph C. Tubayan
Reporter

THE DEPARTMENT of Finance (DoF) believes that despite the acceleration of some foreign-bankrolled infrastructure projects this year, the government should be able to sustain fiscal stability over the medium to long term.

Finance Secretary Carlos G. Dominguez III said in a statement yesterday that “about a fourth of the capital needed for the Duterte administration’s P8.44-trillion infrastructure modernization program” will tap the additional revenues from Republic Act No. 10963, or the Tax Reform for Acceleration and Inclusion Act (TRAIN), while the rest will be funded by Official Development Assistance (ODA).

“I am sure the projects that have been planned for the DPWH (Department of Public Works and Highways) are going to go into high gear now that we have basically our capital already, our own funding for our portion of these projects,” Mr. Dominguez said, referring to the TRAIN that took effect this month.

“And I guess this will also encourage the multilateral agencies and the other funding agencies to increase their lending to us.”

Finance Undersecretary and chief economist Gil S. Beltran said yesterday that “in the short-term, the government’s ’Build Build Build’ Program may exert upward pressure on the debt stock.”

“There’s a big chunk of projects that will start this year. Tataas ’yung debt stock mainly because these are funded by a mix of GAA (General Appropriations Act) and ODA,” Mr. Beltran explained in an interview yesterday.

He said that there are 68 infrastructure projects under construction and in pre-construction phase this year.

Of this complement, 46 worth P664 billion are financed by a budget-ODA mix according to Mr. Beltran.

“In the medium- to long-term, however, a sustainable high economic growth rate (brought about by better infrastructure) will outrun the growth of debt,” Mr. Beltran said.

He added that the smaller-than-expected incremental revenue from the TRAIN should not pressure the government’s fiscal portfolio this year.

“We approve projects on the basis of programmed resources available. Those were not programmed before, so it’s only now start adding into program,” he said.

The DoF expects about P90 billion additional revenues this year from the first tax reform package — about two-thirds of the original P130 billion target.

According to the law, 70% of the additional revenues will be earmarked to infrastructure projects.

It is also confident that Congress could approve within this quarter a tranche providing for estate and general tax amnesties, the easing of bank secrecy restrictions and the increase in the Motor Vehicle Users Charge.

“So there’s no effect. If ever there will be, the debt will remain manageable. Kasi naka-fix na ’yung budget deficit at 3% (of gross domestic product),” said Mr. Belran.

Moreover, Mr. Dominguez said in the statement that the government’s debt as a share of the country’s gross domestic product (GDP) would continue to decline.

“When we took over, it was something like 43%. Even though we borrowed more during the interim from when the time this new administration took over, the debt as a percentage of GDP is now just slightly over 41%,” the finance chief said.

“And we can see that declining over the years.”

The Bureau of the Treasury reported on Monday that the government recorded a P6.652 trillion outstanding debt in 2017, 9.2% more than 2016’s P6.09 trillion to breach the P6.47 trillion target under the Budget of Expenditures and Sources of Financing. It also noted that the government saw a 42.1% debt-to-GDP ratio last year.

“From a high of nearly 75% in 2004, debt-GDP ratio was drastically reduced to below 45%, owing to prudent debt management, fiscal discipline, and economic growth. The economy has been outgrowing debt in the past years, meaning, the country’s capacity to service its debt has been improving,” said Mr. Beltran.

The government’s 75 flagship infrastructure projects set to start this year include the P211.46-billion Philippine National Railway (PNR) North 2, the P134 billion PNR South Commuter Rail and the Clark International Airport expansion.

Projects to commence construction also include the P19.8-billion Davao City Bypass Road,the P23-billion Metro Manila Flood Management Project, the P151-billion PNR South Long Haul Line and the P355.6-billion Mega Manila Subway.

The Duterte administration shifted away from the pure public-private partnership (PPP) mode of implementing infrastructure projects due to delays. Instead, it has decided to use a combination of state funds and ODA for the construction phase and PPP for operation and maintenance.

The government aims to spend some P8 trillion on infrastructure until 2022, when President Rodrigo R. Duterte ends his six-year term, to boost economic growth to 7-8% starting this year.

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