MANILA – Department of Finance (DOF) Secretary Carlos Dominguez III said Monday government debt and its share of domestic economic output rose last year due to pandemic-related spending but this remained fiscally viable and sustainable.
In his speech during the virtual House of Representatives’ Ways and Means Committee briefing, Dominguez said the proportion of debt to gross domestic product (GDP) of the country rose by 15 percentage points last year from a record-low 39.6 percent pre-pandemic.
“It is important to note that about 25 percent of our domestic economy consists of government spending. If we did not increase the level of public spending through borrowings, the domestic economy would have collapsed. This event would have inflicted a far more painful toll on our people,” he said.
Last year, the government borrowed about PHP2.7 trillion, majority of which was sourced onshore.
Dominguez said it is the right time to borrow “to fund our people’s needs” but clarified “we must use borrowings in a prudent manner” such as increasing the capacity of the health care system as well as the productive sectors.
“If we do not do these things, the economy will collapse even further,” he added.
Dominguez also cited the need to spend wisely, such as on infrastructure programs “because infrastructure investments have the highest multiplier effect on economic growth.”
The government touted its infrastructure program, “Build, Build, Build”, as a major priority to ensure the sustainability of domestic growth.
The current administration increased infrastructure investment to around 5 percent of GDP from around 2.8 percent in the previous governments.
Dominguez said the financing program will remain to be sustainable and borrowing will be prudent to fund both the economic investments and the pandemic-related programs.
He said domestic borrowings will continue to account for the bulk of the financing given the high liquidity situation in the economy.
“Both the Department of Finance and the Bangko Sentral ng Pilipinas are in sync in ensuring that fiscal and monetary tools in our arsenal are kept sharp and ready even for a protracted global health emergency,” he added. (PNA)