[ad_1]
Recent reports show that our national debt will grow to P10.16 trillion by the end of 2020. This reflects a strong increase over our outstanding debt of P7.73 trillion recorded in 2019. Our gross domestic loans consist mainly of the sale government securities such as bills and treasury bonds. The Treasury Office also plans to take advantage of a short-term loan of P500 billion from BSP through the buyback and advances line. This will put our country’s debt / gross domestic product (GDP) ratio above 50 percent for the first time since 2010.
The index is significant as it reflects the ability of our country to pay our debt obligations. The 53.9 percent ratio by the end of the year will be significantly higher than the 39.6 percent ratio recorded in 2019. Paying off this huge debt will be a huge problem for our people and their unborn children. The explosion of the national debt, unless the proceeds of it are used for constructive uses, will only contribute to the downward spiral of our economy. What is disgusting is if parts of which are misappropriated and lined up in the pockets of corrupt government officials. It is widely recognized that there is massive corruption in government. PhilHealth’s alleged wrongdoing and reported anomalies at DPWH, which gets the bulk of our budget, are truly regrettable. The president has denounced them and our poor president has even threatened to resign out of extreme disgust.
Paying off our burgeoning loans will be the hardest part. Our government has had a budget deficit and we have no surplus from which we can draw funds to cancel our obligations. The government has announced that it has no plans to introduce new taxes as the economy recovers from the pandemic. Secretary Carlos Domínguez III has stated that “we are not seriously considering any tax because taxing our citizens when their income is low is not a good idea.” Therefore, the current regime is unlikely to increase taxes before the end of President Duterte’s term. With just 20 months in office, what will happen is that the government will resort to more loans during the rest of its mandate to continue financing the crisis we face. The other potential source of funds is selling government assets to raise revenue, including valuable Philippine property in Japan, which we acquire as part of war damage reparations. But we are getting mixed signals whether we are selling them or not. We also don’t have enough savings to finance our economic growth, which will help us finance our loans. The Philippines has one of the lowest ASEAN savings rates. To help reverse our economy driven by this pandemic, we must open up our markets and encourage people to invest. But people cannot invest unless they have enough savings.
This is a time like no other for our country. Just a year ago, we were on the verge of emerging as a developing country with a constant average GDP growth rate of 6 percent over the past few years. Our highest GDP was recorded last year at $ 376.8 billion. Early last year, before anyone thought of a crippling pandemic, economic forecasters were optimistic about our nation’s leap to becoming an upper-middle-income economy. It would have been a solid achievement for a regime shrouded in negative publicity.
And the signs were over. The government has relentlessly pursued massive infrastructure programs never seen before through its ambitious “Build, Build, Build” projects. It has extended comprehensive socioeconomic programs to its citizens, such as free college education at state colleges and universities, free universal health care, increased social security pensions, higher salaries for military and police personnel, etc. Now our economy is reeling, devastated by the worst crisis that has paralyzed our country since World War II. The pandemic has destroyed businesses and displaced millions of workers from their jobs. We have gradually reopened our economy in the hope that such a move will reverse the downward trend in our economy. But there is still no end in sight for our ills. Until we get the vaccine, it will be too optimistic to wait for investor confidence to be restored. And the vicious cycle of borrowing to fund our budget requirements to meet the socioeconomic needs of our suffering people and the funding of our flagship infrastructure projects will continue unabated. Next year, the government intends to borrow another P3.03 trillion to respond to the emergency inflicted by the pandemic. This will be reinforced by another short term loan from BSP projected at an additional P1 trillion. Needless to mention, our debt-to-GDP ratio will rise to 58.3 percent according to the latest newspaper report. The question is: when do we stop this lending frenzy?
It appears that the responsibility for liquidating this debt bomb will be passed on to the next administration, and most likely to the next generation. Our immediate problem now is finding a lender. I can only feel sorry for President Duterte every time he says on national television: “I already found money.“But I feel sorry for my grandchildren, who now have so many debt obligations before they even learn to count. We are mired in debt and each of our 110 million Filipinos has a debt load of 92,363 pesos, more or less. I agree with our financial managers that we should not default on our loans. We will lose our credibility if we fail to meet our obligations and the cost of our loans will only increase. As Alan Greenspan, the revered former chairman of the US Federal Reserve Board, has said: “Debt is bad. Pay as fast as you can. “
