Funding for infrastructure projects would not be utilized as much as possible even as the government realigns the budget to finance coronavirus disease 2019 response, Finance Sec. Carlos Dominguez III said.
“That is the last item that we will touch,” Dominguez said. .
He said the government considers infrastructure spending as “the gasoline that will restart this economy” thus, “we are very hesitant to move money out of the infrastructure expenditure field”.
“That is our ace in the hole and we are moving other monies, such as extra funds we have with our GOCCs (government-owned and controlled corporations) and abandoned projects… the projects that have been abandoned in the government,” he said.
The Duterte administration bids to invest about P1 trillion annually for its infrastructure program called “Build, Build, Build”, citing these projects have long term economic effects.
The Finance chief said spending on social infrastructures, such as free education and better healthcare programs, would continue.
“Those programs, together with infrastructure and this Covid emergency, are our priorities,” he said.
Asked for the need to raise taxes to help the government cope up with the higher funding requirements, he said this would be done “not immediately, but certainly down the road”.
“I think maybe, in a year or two, that might be required. You know, all this money is really, has to be paid somehow. But we were not going to do that immediately. We have a lot of sources first. And as I said, our multilateral agencies and the commercial markets can provide those funds,”the DoF chief said.
The government has announced the allocation of about PHP205 billion for financial aid to affected workers in the informal sector, as well as for the poor households for the months of April and May.
This is on top of the funds for those in the formal sector and those for the purchase of medical supplies like personal protection equipment and masks, among others.
The Bangko Sentral has contributed to the program by boosting government funds through its acquisition of P300 billion worth of government debt papers, which has to be redeemed within six months.
It has also reduced its key policy rates by a total of 75 basis points and universal and commercial banks reserve requirement ratio by 200 basis points to help increase domestic liquidity and ensure healthy economic activities.
It has also eased, among others, the know-your-customer rule to allow more people to open bank accounts to receive government financial aid or get support from other financial institutions.
Dominguez said multilateral lenders like the World Bank and the Asian Development Bank have also extended loans to the government to help in the Covid-19 response.
He said the government is also looking at tapping commercial sources for additional funding.
The Finance chief said they are confident of tapping these loans because the proportion of the government’s debt-to-gross domestic product has declined from over 54 percent in the past to just 41 percent to date.
“So we have a lot of headroom. Right now, we probably will increase this debt to GDP ratio to slightly over 46 percent in view of this crisis,” he added.
Asked whether the government is now considering a supplemental budget, Dominguez said: “at this point, we are doing a bounce-back plan for our economy, and essentially we are assessing the economic damage.”
He said the government is conducting a survey to determine how it can help the various sectors of the society recover from the impact of the global pandemic.
Dominguez is referring to the survey being conducted by the Department of Finance for both the consumers and the businesses.
He said they have received 40,000 responses so far and are studying these to know their next steps.
“We will be putting together a comprehensive package and it is likely that we will go to our Congress to seek a higher budget for the rest of 2020 if needed, and more likely for 2021,” he added.