‘No more fiscal space for additional subsidies’

MANILA, Philippines — It is critical for the government to continue providing subsidies to vulnerable groups as the pandemic persists, but doing so may not be a walk in the park as the administration no longer has enough fiscal space.

In the past days, several lawmakers filed separate bills seeking assistance for different sectors of society, including for single parents acting as breadwinners and stay-at-home mothers, as well as rent assistance for informal settlers.

While subsidies would help, economists told The STAR that the country’s fiscal space may not be able to handle additional spending unless the government realigns its budget.

The government is not just dealing with the ongoing COVID crisis, but also with its lingering impact on ballooning debt, swelling fiscal deficit, persistently high joblessness and elevated inflation, on top of global tensions and market volatility.

Ateneo de Manila University economist Leonardo Lanzona argues that it is crucial to have additional subsidies, especially as the Philippines is not yet out of the woods in its battle against the pandemic.

“Shifting resources toward the economy and production may cause health or education to drift to a lower level than before the pandemic,” Lanzona said.

He warned that if the government abandons the idea of more subsidies, much of the expected returns from its proposed economic program will not be realized.

Foundation for Economic Freedom president Calixto Chikiamco, on the other hand, maintains that the government no longer has the fiscal space for more subsidies, and that there are practical problems in implementing such subsidies, such as determining who is really a single mother, for instance.

Instead, Chikiamco said an alternative for the government is to focus on combating food inflation, which affects the poor the most, and increase agricultural productivity.

“In this way, the disposable income of all families, including single mothers, will increase,” Chikiamco said.

“In the short term, the government should liberalize food importation, such as abolishing the quantitative restrictions on corn, pork, chicken, sugar and fish. This will go a long way in reducing food prices,” he said.

ING Bank senior economist Nicholas Mapa argues that additional subsidies will help cushion the lingering impact of the economic downturn.

However, Mapa acknowledged that fiscal space is tight, which means that the government needs to find proper funding to offset the projected expenditure.

“For now they may need to focus on righting the debt issues before considering more dole-outs, or they can consider new taxes on select segments of society to fund subsidies,” Mapa said.

Budget Secretary Amenah Pangandaman, for her part, said the economic team would study the proposed measures and “come up with a position at the right time.”

“We will have to thoroughly study these bills first to get the magnitude and if it’s consistent with the administration’s priority programs,” Pangandaman told The STAR.

“We will be in close coordination with the rest of the members of the economic team – what we can do to respond to requested budget requirements, such as those created due to the enactment of new laws,” she said.

For Lanzona, there is a need to reallocate the national budget away from less pressing concerns in order to finance subsidies.

For instance, he said major infrastructure projects may have to be set aside first, adding that financial resources have to be consolidated in coming up with a credible project that would deal with the economic disruption caused by the virus.

Finance Secretary Benjamin Diokno earlier said the government is not inclined to provide any more subsidies by next year, banking instead on sustained economic growth to keep and provide more jobs for Filipinos.

But Lanzona argues that the economic team needs to consider their position, as what the country needs is an economic program that focuses on the marginalized sectors.

“Productivity and the rest of the policies and programs should ensure that such programs succeed so that we achieve efficiency without sacrificing the needs of those badly scarred by the pandemic,” he said.