Next administration must consolidate finances to repay pandemic debt

MANILA, Philippines — The next administration needs to undertake fiscal consolidation, wherein taxes could be raised and spending would be cut, to make sure that debts accumulated during the pandemic are paid up, the Department of Finance (DOF) said.

In an economic bulletin, DOF chief economist Gil Beltran said the succeeding government should consolidate its finances and raise collection to repay the debts piled up for pandemic response.

Beltran said it would take the government at least four decades to complete both amortization and interest payment of debts amassed during the pandemic.

“The loans have to be repaid over a period of 40 years starting in 2020. This will require a fiscal consolidation program and improved revenue collection,” Beltran said.

Based on records, the DOF reported that the Philippines borrowed P1.3 trillion as of January to manage the contagion. The bulk of the financing at P559.08 billion was generated by the Bureau of the Treasury through its bond issuances.

The Asian Development Bank (ADB) and the World Bank extended P303.37 billion and P291.95 billion, respectively, to the country to expand its resources during the pandemic.

The Philippines obtained financing worth P66.01 billion from the Asian Infrastructure Investment Bank; P47.56 billion from the Japan International Cooperation Agency; P28.96 billion from the French Development Agency and P10.15 billion from the Korea Eximbank.

Further, the country has taken in P2.74 billion in grants from multiple channels, including P1.28 billion from the Japanese government, P1.06 billion from the World Bank and European Union, and P406.19 million from the ADB.

According to the DOF, the Philippines also received 76.44 million doses of COVID-19 vaccines through foreign donors. The lion’s share of the donated vaccines at 65.33 million came from the COVID-19 Vaccines Global Access or COVAX, facility.

On the bilateral side, the country got 11.11 million shots from China, 3.09 million from Japan and 700,000 from Australia. It also secured shipments of vaccines from the United Kingdom, Poland, South Korea, Argentina, United Arab Emirates, Russia and Brunei Darussalam.

Beltran said the government had to borrow from external sources to bolster the economy after it recorded its worst post-war decline in 2020 at 9.6 percent.

The country’s debt stock has ballooned to a record P12.09 trillion as of February due to double-digit increases in both domestic and external obligations on a yearly basis.