The government debt for the response to COVID-19 reaches 429 billion pesos

Unprecedented spending for the government response to the coronavirus has already cost the Philippines nearly $ 9 billion in new debt since the pandemic began, the Department of Finance (DOF) said.

Finance Secretary Carlos G. Domínguez III said they had already secured a total of $ 8.83 billion as of the end of August, equivalent to approximately P428.91 billion in loans for the Duterte administration’s COVID-19 response efforts. .

Domínguez said that the multi-million dollar financing came from the country’s development partners and private banks.

The finance chief explained that the government needed to increase its indebtedness for the year due to its weak “income-generating capacity” amid movement restrictions, or closures, that restricted economic activities.

“Given everything that has happened in recent months, we expect to raise significantly less revenue than projected at the beginning of the year, even if we spend more for our people.”

Dominguez said, noting that tax collection has contracted by 12 percent since January.

Of the total COVID-19 loans, $ 5.98 billion were budget support financing from the Asian Development Bank, the World Bank, the Asian Infrastructure Investment Bank, a French development agency, and the International Cooperation Agency of Japan.

Meanwhile, the government raised $ 2.35 billion from its latest global bond offering, which Domínguez said had “obtained our lowest coupon in the US dollar market.”

The remaining $ 496.36 million is made up of grants and loans from Philippine development partners for various specific COVID-19 projects, the finance chief added.

“Total loans for 2020 and 2021 are projected to reach $ 3 trillion to support the priority expenditures necessary for the country’s rapid recovery from the COVID-19 crisis and public investments in infrastructure and social services,” Domínguez said.

Despite the increase in loans, Domínguez said the government’s debt ratio, or the proportion of debt to the country’s economy, will remain manageable.

The debt / gross domestic product (GDP) ratio is projected to settle at 54 percent this year and reach 58 percent in 2021 and 60 percent in 2022.

“The projections are even lower compared to the country’s historic high debt level of 71.6 percent of GDP in 2004, Domínguez said.

“Past crises could often be remedied with legislation and spending that restores confidence in the economic sector where the crisis began. This is not the case with the COVID-19 pandemic and the economic crisis it has caused, ”said Domínguez.

“There is no coup de grace to the situation until a safe and effective vaccine is ready for mass distribution,” he added.

Domínguez said that the crisis induced by the coronavirus is “a test of fiscal resistance.”

“The performance of a country’s economy during COVID-19 and the speed with which it can recover once the crisis is over will depend on its capacity for economic recovery. That is why we have been consistent with our approach: we will do what is necessary, but we will not waste, “he added.