MANILA – Finance secretary Carlos Dominguez III recently thumbed down speculations that the Philippines is headed to a debt trap for relying on foreign money to boost the government’s ambitious infrastructure program.
Dominguez made the remark following observations that the Philippines seems inclined to borrow more from China which has been criticized by various quarters for using loans to encourage dependency and undercut sovereignty of borrowing nations.
Dominguez said the country’s debt as a percentage of gross domestic product remained “steady” at 42.1 percent, the same rate as 2016.
“We continue to prudently manage our obligations and we are confident that the rapid expansion of the domestic economy will enable us to decrease our debt further to 39 percent of GDP in 2022,” the Cabinet official said in a speech at a government-organized forum in Pasay City ahead of President Rodrigo Duterte’s State of the Nation Address on July 23.
“Given the rapid expansion of our GDP, we will certainly outgrow our debt. Those who raise the specter of a debt crisis arising from our use of official development assistance to finance infrastructure program are not reading the numbers well enough,” he added.
At present, the National Economic and Development Authority said the Philippines and China signed only one loan agreement intended for the P3.135-billion Chico River Pump Irrigation Project.
Dominguez earlier said that to ensure efficient borrowing, the government will now be targeting the proportion of domestic borrowing to increase to 75 percent, which will reduce the percentage of external financing in the mix to 25 percent.
“The larger proportion of domestic borrowing in the 2019 mix will help us better hedge against foreign exchange risks,” the finance chief said in a statement on Monday.
During the forum, Dominguez also defended the Tax Reform for Acceleration and Inclusion (TRAIN) Law which has been blamed by some sectors for the rise in commodity prices this year.
The TRAIN law reduced personal income tax rates but raised the excise tax on petroleum products and automobiles, and imposed a levy on sugar-sweetened beverages.
Dominguez said the first package of the tax reform program produced “remarkable results we have expected.”
For the first five months of 2018, Dominguez said total revenues have already reached P1.19 trillion, which is higher by 19 percent year-on-year and also 7.4 percent above the target.
From January to May this year, the Bureau of Internal Revenue collected P828 billion, or 15.5 percent higher than the same period last year and 3.1 percent higher than the target set for the agency.
During the same period, the collection of the Bureau of Customs amounted to P229.3 billion, representing a 31.2 percent increase from the same period last year and 2.4 percent above target.
“The tax reform law increased the purchasing power of our communities,” Dominguez said.
Domiguez admitted that the “massive” importation of capital goods needed for the “Build, Build, Build” infrastructure program increased the trade deficit and weakened the peso and the rice situation “pushed prices to abnormal levels.”
“None of these factors are permanent infirmities,” Dominguez said.
“But without the tax reform and the infrastructure program that it is funding, we will continue to suffer from high cost of production and transportation. With the tax reform and better infrastructure, the road to higher productivity, and thus lower and stable inflation is within reach,” he added.
The Philippine Statistics Authority reported on Thursday that inflation reached a five-year high in June at 5.2 percent, breaching the 4.3- to 5.1-percent range the central bank had predicted, and the 4.9-percent outlook of the Department of Finance. (GMA News)
