Daily Tribune (Philippines)

Pandemic response, BBB bloat debt

Budget deficit climbed from 3 percent of gross domestic product before the pandemic to about 8.2 percent in 2021

- BY RAADEE S. SAUSA

Public debt grew mainly as a result of financing for pandemic responses and the sustained spending for the “Build, Build, Build” (BBB) program, a central bank official said.

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said over the weekend that the debt ballooned “as a result of the pandemic,” the economy contracted. Thus, government revenues plummeted. At the same time, the government has to increase spending to finance new programs, such as the hiring of more medical personnel, purchase of drugs and medicine, building of additional health facilities, purchases of vaccines, distributi­ng cash and non-cash grants and others.

Diokno added the budget deficit climbed from 3 percent of gross domestic product (GDP) before the pandemic to about 8.2 percent in 2021.

Government has to borrow money to plug the widening budget gap. Necessary move

“Think of the counterfac­tual: Had we not done what we did as a nation and invested in the vaccine, we would still be languishin­g from Covid-19 and the economy would still be in a deep slump,” the governor said.

The Bureau of Treasury, earlier reported that the national government (NG) debt has reached P12.03 trillion as of the end of January.

Total NG debt rose by P301.12 billion or 2.6 percent more due to the net availment of both domestic and external debt, it said.

Out of the total, 30.4 percent was sourced externally while 69.9 percent were domestic borrowings, the Bureau added.

“Half-finished projects are worth nothing, they need to be completed. The high payoff for the completed public infrastruc­ture will be realized as the economy recovers. The new and improved infrastruc­ture will increase the capacity of the economy and, at the same time, improve the mobility of people and goods,” Diokno added.

Debt manageable

The current level of public debt is sustainabl­e, the governor said.

“Before the pandemic, the Philippine­s debt-to-GDP ratio was 39.6 percent and as a result of the pandemic, it is now slightly above 60 percent,” he added.

He pointed out though that public debt is quite manageable.

“The country can easily outgrow its debt since we expect the Philippine economy to grow much faster than its debt. Put differentl­y, the denominato­r (nominal GDP) is going to grow much faster than the numerator (nominal level of debt).”

The Philippine­s debt-to-GDP ratio at 61 percent is much lower than that of other countries. For other countries, their debt-to-GDP ratio ranges from 100 to more than 200 percent.

 ?? ?? Seize day With infections down to record low, the summer season beckons for Filipinos to start traveling for leisure which is what the economy needs.
Seize day With infections down to record low, the summer season beckons for Filipinos to start traveling for leisure which is what the economy needs.
 ?? PHOTOGRAPH BY YUMMIE DINGDING FOR THE DAILY TRIBUNE @tribunephl_yumi ??
PHOTOGRAPH BY YUMMIE DINGDING FOR THE DAILY TRIBUNE @tribunephl_yumi

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