THE Department of Finance (DoF) said that the government’s plan to manage the national debt calls for its gradual reduction without scaling back the infrastructure spending that will enhance long-term productivity.
The department’s Chief Economist Gil S. Beltran, in an economic bulletin on Saturday, said debt reduction efforts need to be focused on bringing down the debt-to-GDP ratio by narrowing the deficit.
“The current medium-term fiscal program is calibrated such that the deficit gradually narrows down without sacrificing infrastructure spending,” he said.
The DoF is preparing a fiscal consolidation plan to manage the government’s outstanding debt, which grew nearly 20% to P11.73 trillion at the end of 2021. This pushed the debt-to-GDP ratio to 60.5%.
The 2021 deficit was P1.7 trillion, up 21.87%, with the Treasury bureau citing spending growth due to infrastructure investment and pandemic recovery efforts.
“The 2021 deficit is estimated to be around 8.2% of GDP (gross domestic product) and is programmed to fall to 5.1% by 2024,” Mr. Beltran said.
“In contrast, infrastructure spending, (as a share of) GDP, could have reached as much as 5.6% last year, set to increase to 5.9% this year, and settle at 5.4% by 2024.”
Mr. Beltran said continued infrastructure spending is key to attracting investors.
“Cutting infrastructure spending may narrow down the deficit momentarily but will definitely be counter-productive in the long run as far as economic recovery is concerned,” he said.
“Simply put, a half-finished bridge does not cut travel time even by a minute. Infrastructure projects have to be fully completed before they can increase the country’s productive capacity and enhance its growth potential.”
Institute for Leadership, Empowerment, and Democracy Executive Director Zy-za Nadine Suzara said last month that the government should avoid wasteful expenditure and instead focus on funding pandemic-response measures.
She called budget priorities in 2022 “unfairly (weighted towards) infrastructure projects” while P250 billion in projects for education, health, and social services were to be funded via unprogrammed appropriations, which can only be financed from excess or new revenue. — Jenina P. Ibañez