President Duterte’s successor should avoid accumulation of additional government debt, as the Department of Finance (DOF) said the next administration should prioritize policies that will entice more economic activity.
Finance Secretary Carlos G. Dominguez III said on Thursday, April 21, that the debt problem incurred during the more than two-year Covid-19 crisis will be the biggest challenge for the next administration.
Dominguez pronouncement comes after the DOF revealed that it would take up to 40-years to payoff all the additional foreign debt, amounting to at least P1.3 trillion, incurred by the Duterte administration since 2020.
“The biggest challenge for the next administration is really to grow out of the debt that we incurred during the pandemic,” Dominguez said in a televised interview with Bloomberg television in Washington.
During the pandemic, the government resorted to borrowings to cover the massive cost of Covid-19 response and the corresponding drop in revenues due to economic slowdown spawned by the global pandemic.
“The next administration will have to design policies and stick to very strict fiscal discipline to grow out of this debt problem,” he added.
In particular, Dominguez said the Philippines’ economy, as measured by gross domestic product (GDP), should grow by at least six percent over the next five to six years to bring down the debt ratio.
In 2021, the government’s debt-to-GDP ratio rose to 60.5 percent from a historic low of 39.6 percent in 2019.
Based on the Bureau of the Treasury data, government debt jumped 32 percent from P8.22 trillion to P12.152 trillion between 2020 and 2021.
“However, everything is in place in the Philippines to achieve that ,” the finance chief said, citing that the country managed to grow 5.7 percent last year and 7.5 percent in the first three-months of 2022.
But Dominguez also admitted that the ongoing geopolitical conflict in Eastern Europe would drag down the Philippines’ growth potential.
“We were well on our way to recovery, except now we have this Ukraine crisis, and that's going to weigh a bit heavily on us. Although we're not combatant, we’re affected by the increase in prices of fuel,” he said.
For 2022, the Duterte administration is targeting to grow the economy by seven percent to nine percent.