Borrowings to address revenue constraints

April 19, 2020

The government has funds to support its coronavirus disease 2019 response but additional requirements will be financed by borrowings as revenues are constrained, Finance Sec. Carlos Dominguez III said.

When the government declared the community quarantine in Metro Manila for the period from March 15 to April 12, 2020, which was later expanded to an enhanced community quarantine  in Luzon and extended until April 30, the deadline for the filing and payments of income tax return was also extended from April 15 to May 15 and then to May 30.

“Extension of the tax deadline means we have to finance expenditures more from borrowings than from revenues” Dominguez said.

Last year, collections of the Bureau of Internal Revenue for April alone reached P235.5 billion, up by 1.2 percent from its P232.6 billion collections during the same month in 2018.

April is a major revenue collection month for BIR because of the ITR filing, the deadline of which has been set on April 15 of every year.

The government has formulated a four-pillar Covid-19 response program that requires about P1.17 trillion.

Earlier, the DoF chief said policy reforms have allowed the government to have the money to finance its Covid-19 response program.

Aside from the fiscal measures, the government received additional boost from the Bangko Sentral  after it extended a P300-billion funding to buy government securities that would  be repurchased by the Bureau of the Treasury at a maximum period of six months.

The government has secured a $500-million loan from the World Bank  under the Third Risk Management Development Policy Loan.

It has also received a $3-million grant from the Asian Development Bank for the acquisition of emergency medical supplies and delivery of healthcare services.

Dominguez said they are negotiating for total loans amounting to $5.7 billion from WB, ADB, and the Asian Infrastructure Investment Bank.

National Treasurer Rosalia de Leon said they continue to monitor developments before deciding when to tap foreign commercial fund sources.

“Like in (a) tennis match in Wimbledon, we are in (the) center watching the play. So we continue to monitor developments,” D Leon said, adding that Australia and Saudi Arabia recently issued debt papers.

She said “deals are being printed, if you are willing to take the price”.

The government has set a 75-25 borrowing target for this year in favor of domestic fund sources, but de Leon said this might change to about 70-30 or 72-28 because of the Covid-19 response.