May 26th, 2022

I am elated by the selection of BSP Governor Ben Diokno to the Department of Finance. He is, by far, the strongest appointment President-elect BBM has made. He is well respected internationally, and has the gravitas and experience necessary to steer the country’s finances through the headwinds it is facing. 

Ben is also a close personal friend since my analyst’s stint in early 1990s and first political  stint  during the Erap era, whom I will get in touch with soon to talk about ways forward on fiscal reform. I have already talked about my own proposal for a phased fiscal stabilization program. 

First, fiscal protection – we need to make sure we do no further harm to our finances by preventing any wasteful spending, and plugging loopholes in the tax system. 

Second, fiscal consolidation – we need to strengthen the current tax structure with stronger and more modern tax administration. This morning, I heard PBBM wants to codify how we do taxes, and I am proposing that we codify our tax administration rules in a manual similar to the BSP’s Manual of Regulation for Banks so that we are all looking at just one central rulebook. That will also involve some tax policy reforms in the “low-hanging” areas, the easiest being real property valuation reform, some easy VAT reforms like those on input VAT overdeclaration, or a temporary deferral of PIT reduction in 2023.

Third, fiscal expansion – this is where we undertake the major reforms, like VAT or carbon taxation. That is to make sure we don’t disrupt economic recovery.

I am also elated by the news that Philip Medalla will be BSP Governor to replace Ben Diokno. Philip knows more than almost anybody else in the country about how to manage debt sustainably. 

All in all, the Diokno, Balisacan, and Medalla appointments are solid choices and I expect to work with the economic team more closely in the weeks ahead.