Draft federal Constitution to hike spending to 1243.5 B

The National Economic and Development Authority (NEDA) said the draft federal Constitution will require the government to substantially increase its spending requirement that will result in “inevitable disruptions” to the economy.

Socioeconomic Planning Undersecretary Rosemarie G. Edillon said late Wednesday that the draft Constitution, if drastically approved and implemented, will require the federal government to hike spending by 1156.6 billion to 1243.5 billion in its first year alone.

Edillon said that based on NEDA’s estimates, this size of additional expenditures will raise the government’s budget deficit by between

2.8 percent and 3.4 percentage points to 6.4 percent of the economy, as measured by the country’s gross domestic product (GDP).

The potential deficit estimate is way beyond the Duterte administration’s program of not more than threepercent until 2022.

Edillion also noted that the federal government will also need to set aside another 110 billion to build new offices in the regions.

During a meeting of the economic development cluster and members of the the Consultative Committee (Con-Com) last Wednesday, Edillion presented that it may be “difficult to ascertain whether or not a federal structure will work in the Philippine setting.”

NEDA official also said that the draft constitution will result in “inevitable disruptions to the economy’s growth momentum and progress in infrastructure improvement efforts… [with] unsuitable economic costs.”

Edillon also said that the draft, once implemented, could affect foreign direct investments and international trade, as well as may risk the country’s investment grade credit ratings.

While Con-Com insists that its proposed revenue sharing scheme between the federal government and federated regions is 50:50, the NEDA observed a “mismatch” if the other provisions pertaining to all forms of income are factored in.

The NEDA official said that based on their internal estimates, the actual revenue sharing under the draft charter is 60:40 in favor of the federated regions.

Edillon added that the revenue sharing may go up to 80:20 if subsidies, tax expenditures, interest payments, net lending and financial expenses given to the federated regions are also considered.

“Mismatch in funds and spending, especially for federal government, will impede the delivery of good and services under its jurisdiction,” she said.

For these reasons, Edillion suggested that if the Philippines shifts to a new form of government, there should be a 15-year transition roadmap in the paper submitted to the Constitutional Review Committee.

“Whether or not the structure of government will be changed, a forward-looking strategy is to strengthen the capacities of the bureaucracy at both the regional and local levels to take on central office functions,” Edillon said.