THE COUNTRY is looking to borrow up to $2 billion from multilateral lenders to support increased spending to stem the impact of the coronavirus disease 2019 (COVID-19), the Finance chief said, adding the government’s fiscal position is sound and can accommodate larger debt to plug its budget deficit.
“We are currently in negotiations with multilateral agencies for $1 billion up to $2 billion for funding support for this. We have to realize, we are looking at a drop in revenues. So we have to cover that gap somehow so that we maintain our pace of spending,” Finance Secretary Carlos G. Dominguez III told reporters via Google Meet on Wednesday, adding slower economic activity and business disruptions, largely caused by the month-long lockdown in Luzon, will hurt the government’s tax take.
He said the Finance department is looking to tap multilateral lenders for grants and loans to provide the needed funding, including the World Bank, Asian Development Bank and Asian Infrastructure Investment Bank.
“We are continuously working online with them. I believe that they see the immediate need and are also working fast. We want to do it early because all the countries in the world are trying to do the same thing,” he added.
Mr. Dominguez said the government is in a “very good position” fiscal-wise to support the economy versus the impact of COVID-19, with the national budget in place and a historically low debt level of 41.5% of gross domestic product (GDP) last year.
“As you know, we have reduced our debt levels from over 70% of GDP to only 41% of GDP now. So we are in a very good position to combat this coronavirus and we have the debt capacity to do that,” Mr. Dominguez said in a Bloomberg TV interview.
In a separate interview, Mr. Dominguez did not say how much additional debt the government can accommodate this year, but assured that “we are willing to do as much as it takes” to aid Filipinos who lost their livelihood, “protect frontliners,” and support the entire economy.
Citing preliminary estimates by the Development Budget Coordination Committee, Mr. Dominguez said they are looking at a P318.9-billion drop in revenues if 2020 GDP will contract by one percent and a P286.4-billion decline if the economy will post flat growth. This is on top of an estimated P14-billion drop in revenues due to easing demand and falling global oil prices.
The government is also projecting P145 billion in delayed tax payments after the deadline for filing of income tax returns was extended by one month to May 15.
“Because our revenue is down, we will have to borrow to cover that. That is our primary task. When I said we will do what is required, we will do what is required within the budget and move things around that’s why we asked for that (emergency) power. Once we see the extent of the damage to the economy, we will determine how much budget we will need if any,” he said.
The World Bank has committed to provide $100-million loan to the Philippines while the Asian Development Bank has already extended a $3-million grant.
Mr. Dominguez said even though higher borrowings may be credit negative for the country, the plan to secure an “A” level credit rating by 2022 is “still there.”
The government has rolled out an initial P27.1-billion economic stimulus package to help virus-affected sectors.
President Rodrigo R. Duterte signed late Tuesday Republic Act No. 11469 or the Bayanihan to Heal as One Act which will allow him to realign or reallocate as much as P275 billion in national budget and off-budget outlays to the government’s emergency subsidy program to provide relief to some 18 million Filipino households most affected by the pandemic and for the treatment of infected persons.
The government targets to collect P3.49 trillion this year to fund its P4.1-trillion spending plan, with the remaining funds to be sourced from its borrowing activities.
Socioeconomic Planning Secretary Ernesto M. Pernia on Wednesday warned a wider budget deficit that could lead to a repeat of the “deep fiscal crisis” in 2004 when the country reached a debt level of around 75% of GDP.
The National Economic and Development Authority (NEDA) estimates that the budget deficit could widen to 4.4% to 5.4% of GDP this year amid an increase in government spending, well beyond the 3.2% cap, which economic planners have yet to revise.
“Itong nangyayari ngayon na marami ang expenses ng government (As the government ramps up spending), on one hand, on the other, kokonti lang ang revenue (revenues are falling), aabot ’yung deficit natin to (our deficit could reach) 4.4-5.4% ng GDP which is really a danger zone, red flag na ’yun eh. Beyond 3.5% of GDP is already a red flag,” Mr. Pernia said in a radio interview.
The NEDA chief also warned that the country’s unemployment rate, which went down to 5.1% in 2019, could surge to double-digits as lockdown measures across the country continue to disrupt business operations.
NEDA said around 116,000 to 1.8 million Filipinos could lose their jobs due to the economic impact of COVID-19.
Mr. Pernia added that the country lacks human resources such as experts, nurses, doctors and scientists that could aid the ongoing battle against COVID-19 as a growing number of Filipinos choose to work abroad.
NEDA said 2020 GDP growth could hit 4.3% at most this year if the impact of the pandemic will be mitigated. If the Luzon-wide enhanced community quarantine will be extended beyond one month, GDP could contract by 0.6%, the first decline since 1998.
The state economic planning agency also sees the country losing between P428.7 billion to P1.355.6 trillion in gross value added or equivalent to 2.1-6.6% of GDP.
The government has yet to revise its 6.5-7.5% GDP growth target for this year. The economy grew by 5.9% in 2019, failing to meet the 6-6.5% goal. — Beatrice M. Laforga