Nat’l budget seen to benefit from peso depreciation

THE CONTINUED WEAKNESS of the Philippine peso against the US dollar works for the benefit of the proposed 2023 national budget, Finance Secretary Benjamin E. Diokno said, as it would translate to higher revenues and a narrower fiscal gap.

“On the exchange rate, without saying that I favor the depreciation, the impact of the depreciation actually is favorable to the budget because a P1 depreciation would mean a higher revenue for the government,” Mr. Diokno told senators during a Senate Finance Committee hearing on Wednesday.

“It will involve, for example, P10-billion additional revenues with little adjustment on the disbursement side and that’s mainly on the debt servicing because we cannot spend what Congress has not authorized,” he added, noting that the net effect of a P1 depreciation is a P7.6-billion reduction in the budget deficit.

The peso closed at P57.11 against the US dollar on Wednesday. Year to date, the peso has depreciated by 11.98% or P6.11 versus the greenback.

Economic managers assume a foreign exchange rate of between P51 and P55 per dollar by next year.

Mr. Diokno said the economy has recovered from the coronavirus disease 2019 (COVID-19) pandemic, giving the Marcos administration the room to pursue targeted subsidies and other projects as opposed to “wasteful” ayuda (cash aid).

“At this time, the economy is now at the 2019 level,” he said.

The Philippine economy grew by 7.8% in the first half of 2022, above the full-year target of 6.5-7.5%.

“The pandemic-related ayuda at this time is a waste of funds… but the targeted assistance, say the 4Ps (Pantawid Pamilyang Pilipino Program) [and to] those affected by the increase in the price of oil, I think we should continue those,” Mr. Diokno said.

“It’s really giving away ayudas at this time in the same manner that we have given during the Bayanihan I and II. It’s really a waste of money because we have other important projects,” he added.

‘INEQUITY’
Meanwhile, Senator Maria Imelda “Imee” R. Marcos raised a concern from local government units (LGUs) that the P5.268-trillion national budget reflects inequity, as the funds allocated for LGUs are insufficient for their new responsibilities amid the devolution of functions due to the Mandanas-Garcia ruling.

“The regional allocations are all decreased once again: Luzon, Visayas, and Mindanao. With only (National Capital Region) and the central offices registering an increase. Once again, there’s a perceived inequity,” Ms. Marcos said.

Mr. Diokno said there is concern whether or not LGUs can absorb the funds that is allocated to them.

“The truth of the matter is that the local governments have a surplus position consistently. They are not spending their money. Whereas the [National] Government (NG) is in a deficit position. In fact, it is the National Government who pays for our national debt, not [the] LGUs,”the Finance chief said.

The national tax allocation (NTA) for LGUs in 2023 amounts to P820.27 billion, lower by 14.47% than this year’s allocation as there were lower revenue collections in 2020 amid the COVID-19 pandemic.

“Looking back, in hindsight, we should not have devolved health given this pandemic. I think any citizen, regardless of where he lives, should get the same care,” Mr. Diokno said. “I think health should really be a responsibility of the National Government rather than the local government.”

AMENDMENTS TO EO
Budget Secretary Amenah F. Pangandaman said President Ferdinand R. Marcos, Jr. ordered them to prepare amendments to Executive Order (EO) 138, an outline to the Mandanas ruling that was issued by the Duterte administration in June 2021.

“We have a draft already and, I think in 2 weeks’ time, we will convene with the LGUs,” she said.

The debt-to-gross domestic product (GDP) ratio swelled to 62.1% in the second quarter from the pre-pandemic ratio of 39.6% in 2019, mostly exacerbated by the need to borrow in responding to the pandemic.

The National Government’s outstanding debt is expected to reach P13.43 trillion by the end of the year. As of end-July, the debt stood at P12.89 trillion.

National Treasurer Rosalia V. de Leon told senators that the estimated debt stock by 2028 will be at P19.2 trillion.

Mr. Diokno reiterated the government’s plan to outgrow the debt, referring to its growth targets of 6.5% to 8% for 2023 to 2028.

When asked what will drive this growth, Mr. Diokno identified the mining and agriculture sectors.

Mr. Balisacan said that growing the agriculture sector depends on improving productivity through research and development.

“We focused so much then on improving productivity through research and development… Biotechnology was very high on our agenda at that time,” said Mr. Balisacan, referring to his tenure in the Department of Agriculture in the early 2000s.

“Twenty years later, there’s none. The efforts were not sustained. Biotechnology has not gone far and wide in this country when it’s already driving productivity in Vietnam, Thailand, and Indonesia. So, adapting, using new science, [and] investing in these new technologies is the only way to go,” Mr. Balisacan added.

Manufacturing is also seen as a growth driver, the economic managers concurred, with food processing as a potential significant contributor if only the costs of agricultural inputs can be lowered. — Diego Gabriel C. Robles