Public debt need not be worrisome if funds are spent wisely

Published August 9, 2022, 12:05 AM

by Former Senator Atty. Joey D. Lina


Former Senator
Atty. Joey Lina

Last Friday’s revelation by the Bureau of Treasury that the national government’s debt as of June 30
stood at ₱12.79 trillion might seem distressing for many people.

Others might even describe as staggering the total amount of public debt which is more than double the ₱5.9 trillion total debt in 2016 at the start of the previous Duterte administration. It could even be disturbing for some, particularly the thought that each Filipino now supposedly owes around ₱114,650.

To be sure, our huge debt problem that grew enormously due to the pandemic is not unique to us as many countries have also incurred more loans to finance pandemic response. While the natural inclination is to be worried about the heavy debt burden, especially of its impact on future generations of Filipinos, the sizeable debt isn’t all bad news and, therefore, shouldn’t be too worrisome.

Indeed, some sort of good news can still be found in our national debt simply because not all of the total amount are foreign borrowings. “Of the total debt stock, 31.5 percent was sourced externally while
68.5 persent were domestic borrowings,” a statement of the Bureau of Treasury said.

Thus, the domestic debt amounting to ₱8.77 trillion, which is more than double
the amount of the external debt of ₱4.02 trillion, means that Filipinos are the biggest lenders and when paid, the money stays within the country and, therefore, can further boost local economy.

That the outstanding debt, pegged at around 63.5 percent of the gross domestic product, is not far from the international threshold of debt-to-GDP ratio of 60 percent is also deemed good news. Other
countries have higher debt ratio. Latest figures show that Malaysia is at 64 percent, Singapore at 140 percent, Japan at 266 percent, and US at 122 percent.

Another sort of good news is the reported intention of the Marcos administration to reduce, by year 2025, our country’s debt-to-GDP ratio to less than 60 percent.

Also, some finance experts say that the worrisome thought that each of the 110 million Filipinos has a share of around ₱114,650 in the national debt is misleading because such a thought would seem that all of us have to pay sooner or later.

“Fortunately, a country’s national debt is not the same as the debt of a person or family, which must be fully paid off at some point. The difference between a family and the government is that the latter can keep rolling over its debt—that is, borrow new loans to pay off previous ones—indefinitely into the future,” economist Cielito Habito said.

There’s no dispute about the need for government to resort to borrowings to be able to spend for expenditures to attain economic recovery amid the devastation brought about by the pandemic.
And the one and only way to economic recovery is through government spending.

“Kasi nga po bagsak ang mga pamilya, bagsak ang mga negosyo, ang tanging sector lang po na
meron kakayahan gumastos at magpaikot ng pera ng ating ekonomiya ay ang gobyerno (Because
families are down and businesses are down, the only sector capable of spending and pump priming
the economy is government),” Marikina Rep. Stella Luz Quimbo, another brilliant economist, once explained.

Thus, to spend on a timely basis, and to spend wisely is ideal. And it’s good news to hear Socioeconomic Planning Secretary Arsenio Balisacan saying that there needs to be a balance between spending on public works and alleviating poverty.

“We need to balance the infrastructure side on the one hand and social protection, health, and education,” Mr. Balisacan said in an ANC interview. “What do you do with world-class infrastructure
when your people, their children are ranked poor, the poorest in the region? If you want to push for
world-class infrastructure, but health is in crisis, education is in crisis, we need to go back and reflect on what is really fundamental… Development should be shared by all, especially the poor.”

Past neglect in assessing impacts of varied big budget government programs to uplift the lives of
the poor has been behind the failure to achieve development goals, as well as high fiscal leakages and wastage of public funds.

The proposed ₱5.268 trillion national budget for 2023 which the Marcos administration intends to
submit to Congress this month ought to be assessed and scrutinized carefully to ensure there would be no wastage of public funds coming from borrowings. Indeed, if public funds are spent wisely, the national debt need not be too worrisome.

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