Financial architecture

He’s all over the place. I would see him, almost always part of the official delegation of President Duterte’s visit around the country and abroad. He seems indefatigable – from selling the Philippines to investors as an alternative investment haven, to explaining the advantages of the Tax Reform for Acceleration and Inclusion (TRAIN) law and all other things in between. I am referring to Finance Secretary (SecFin) Carlos “Sonny” G. Dominguez who, as far as I am concerned, is the financial architect behind the memorandum of agreement (MOA) between the Department of Education (DepEd) and Government Service Insurance System (GSIS) which eases and enables teachers and other DepEd personnel to settle their debts.

Pivoting from DepEd Order No. 5 putting a R5,000 threshold on the net take-home pay of teachers, Secretary Sonny chaired a meeting sometime last March with DepEd Secretary Leonor Briones, GSIS President and General Manager Jesus Clint Aranas, and Bangko Sentral ng Pilipinas (BSP) Governor Nestor “Nesting” A. Espenilla on collateral damage caused by DepEd Order #5 to private lending institutions (PLIs).

Uncovered was the flaw in the system of the state-pension fund to promptly collect amortization from the teachers. On one hand, the exposure to the mentors is a “receivable” in the book of GSIS. On the other hand, GSIS earns from the non-collection arising from the piling up of penalties, surcharges, and accrued interest. While this has been going on, the teachers have also acquired loans from PLIs that could reach a little over R100 billion.

The verdict was teachers have over-borrowed.

Both BSP Gov. Nesting and SecFin Sonny, who is a member of the Monetary Board, the policy-making body of the BSP, agree that this situation has to be firmly addressed as it “disrupts the lives of the teachers” because it led them to a deep financial quagmire, while banks or PLIs will be bleeding due to the queueing system of payment, listing them in the bottom of the payment system.

The SecFin ordered GSIS to correct its flaws, reconcile its data on its financial exposure to teachers, which, according to my sources, could likewise hit P100 billion. The Finance Department has supervisory powers over the state pension fund.

Thus, the MOA that was signed last Monday with no less than President Duterte as witness. As far as I understood it, in actuality, there is no new money involved in GSIS’s lending facility. As explained to me by my market sources, GSIS Financial Assistance Loan (GFAL) has been designed to ease the payment structure of teachers and other DepEd personnel due the state-pension fund – a refinancing tool, taking into consideration mentors’ capacity to settle their outstanding obligations to GSIS, including compliance with the R5,000 net take-home pay.

GFAL is a step in the right direction.

Praises and admiration to SecFin Sonny for this. Next move, I do believe, is his policy stance to “protect” and “provide” safety nets for the PLIs, which for now are at the bottom of the payment system. Following the implementation of the TRAIN law that lowers the tax on salaried employees, teachers’ paying capacity is expected to improve.

Talkback to me at sionil71@ gmail.com