By Chino S. Leyco
The Department of Finance (DOF) is lukewarm about the proposed measure in the Senate seeking to put a limit on the national government’s borrowing as this, once passed into law, may result in “inflexibility” in times of crisis.
On the sidelines of the Senate opening ceremony yesterday, Finance Secretary Carlos G. Dominguez III said that they have to discuss with Senator Ralph G. Recto the proposed “debt cap” of not more than 50 percent of the country’s economy, or gross domestic product (GDP).
While Dominguez acknowledges that the senator’s push for a debt ceiling is aimed at promoting fiscal responsibility, he believes there may be other options in attaining the same goal.
“I’m pro-fiscal responsibility, [and] that’s one way to do it, but it might introduce inflexibility to the system that will affect future governments,” Domiguez told reporters. “I’m not sure limiting is the only way to do it.”
Dominguez, however, clarified that he is rejecting the bill filed by Recto, a former socioeconomic planning chief, saying “there are many factors in debt management, and I will discuss this with him to arrive at the same goal.”
Last week, Recto refiled his bill proposing that total indebtedness of the national government should not exceed 50 percent of the economy. To date, the Philippines debt-to-GDP ratio stood at 41.8 percent, equivalent to P7.3 trillion.
“The important thing is not the amount, the important thing is also the term. Supposedly, it’s 50 percent, but everything is maturing next year, what’s the point? It’s also the term, the tenor, [and] how you’ll going to use it,” the finance chief said.
Recto earlier said that the national government’s outstanding debt continues to climb and seen to breach the P8-trillion market by the end of this year.
“It is better to impose a ceiling by law to shield the government, present and future, from piling up debt. We set it at 50 percent of GDP, with the prohibition that the national credit card shall not be maxed out,” Recto explained.
The lawmaker, however, said placing a cap would not “handcuff the government” from securing loans to finance infrastructure projects “but merely sets the red line in the debt meter that this and future governments must not hit.”
He added having a limit will “force government to observe credit discipline, constantly monitor the debt needle, and deliver them from the temptation of accepting donor-driven projects of dubious benefits to the people.”