Government warned vs rolling back hard on borrowings

MANILA, Philippines — The government needs to repay its outstanding debts to weather the country’s fiscal risks in the recovery stage, but should remain open on borrowing beyond program to finance efforts against the pandemic, economic experts said.

Jose Enrique Africa, executive director of think tank IBON Foundation, said the government should keep its doors open to new debts next year given the financial requirements in containing the spread of the coronavirus.

Africa said what the government should focus on is utilizing these borrowings on measures that impact the vulnerable sectors to improve economic output in the recovery phase.

“If current borrowing is used productively, the debt burden is not necessarily unmanageable. For instance, public spending can be wielded to create multiplier effects (and then) cause output to expand,” Africa said in an e-mail to The STAR.

“More rapid recovery will also mean improved revenue generation down the line to pay for this. This also means that, in effect, rolling over this debt by borrowing more domestically should not be a problem,” he said.

Ateneo de Manila University economics professor Leonardo Lanzona said the Bangko Sentral ng Pilipinas should prepare to lend the government additional resources in case the pandemic drags on due to the mutation of new variants.

Like Africa, Lanzona said the government only has to worry about its increasing debts if it fails to use them for programs and projects that would push across-the-board recovery.

“Outstanding debts need to be paid, but it should not be a binding constraint if the government can improve productivity and achieve the necessary growth,” Lanzona said.

“The Bangko Sentral ng Pilipinas must be ready to provide the needed financial resources as it has done during the pandemic. Its goal is to ensure that the government will have the necessary resources to implement a strong recovery program,” he said.

The country’s debt pile has risen to an all-time high of P11.97 trillion as of October, which forced the government to temper its borrowings in the final months of the year.

The government also plans to cut its borrowing plan to P2.47 trillion in 2022, from a program of P3.07 trillion this year, in a bid to hold the debt ratio to within sustainable levels.