Dominguez justifies P3-trillion borrowings by gov’t in 2021

President Duterte’s chief economic manager justified the multi-trillion peso borrowings for the year, citing the national government needed to rely on financing to the bridge the widening gap between revenues and expenditures.

Finance Secretary Carlos G. Dominguez III said on Tuesday, June 15, the prolonged coronavirus pandemic has reduced revenue flows of the government due to the lockdowns that slowed down economic activity.

At the same time, Dominguez noted that the government also suffered large spending over the past year-and-a-half for its coronavirus response.

“To meet the health emergency, the government had to quickly mobilize resources to support our health system, procure test kits in the millions, and deliver cash support to our most vulnerable citizens. All these required higher deficit spending,” Dominguez said.

The Duterte administration’s budget deficit is expected to widen to P1.86 trillion this year, about 36 percent higher than in 2020 and is equivalent to 9.3 percent of gross domestic product (GDP).

The larger budget deficit, Dominguez said entails P3.1 trillion in borrowings in 2021, sourced mainly from the local markets at around 75 percent and 25 percent from abroad.

The government’s total debt as a share of GDP is expected to rise to 58.7 percent in 2021 due to higher deficit spending, up from 54.6 percent last year and a historic low of 39.6 percent in 2019.

“Despite the increase, our prudent debt management gave us the fiscal headroom to deal with the pandemic. Thus, the anticipated temporary rise in debt remains within the prescribed bounds of fiscal viability,” Dominguez said.

For COVID-19 vaccine procurement alone, Dominguez said the government initially earmarked P88.6 billion, enough to administer 148 million doses and inoculate at least 70 million Filipinos or 100 percent of our adult population.

Of the P88.6-billion funding, P2.5 billion forms part of the budget of the Department of Health under the 2021 General Appropriations Act.

Meanwhile, the P10 billion are funds under the Bayanihan 2 law allocated for the COVID-19 vaccination program. The remaining P3.26 billion comes from other sources in the 2021 National Budget and the Bayanihan 2.

Around P57.3 billion are sourced through concessional loans from our multilateral partners, such as the World Bank, the Asian Development Bank, and the Asian Infrastructure Investment Bank.

“We deliberately chose this financing strategy to ensure two things. First, that the vaccines we buy are internationally accepted, and have passed the stringent criteria for safety and effectiveness,” Dominguez said.

“Second, that the vaccine procurement is totally transparent. The loans follow a direct payment scheme as a disbursement method. This means that loan proceeds will be directly coursed from the lender to the vaccine manufacturers upon delivery,” he added.