Press Releases

Salceda on statement by DOF’s Beltran that debt would have been 2.2 tn more with Congress’s proposals

June 8th, 2022

Frankly, I don’t see the point. First of all, it was Congress that also decided to pursue the kind of stimulus measures that we funded, and what we did not pursue.

Second, the figure counts proposals of very similar nature, so I think some double counting may have been done. The only major proposal was 1.4trn of which P800bn was in net lending (assets) not current outlay (outflow).  Obviously an overstatement at best. 

But assuming no double counting took place, and indeed all distinct provisions from all proposals amounted to some 2.2 trillion, the question to ask is: would GDP have collapsed by as much as it did if we acted with a bigger, more comprehensive stimulus package? Remember, we declined larger than anybody did in 2020. And as the economy declines, so too does revenue collection. So, debt-to-GDP and the deficit would likely not have been as big as simply adding the cost of the proposed stimulus.

Third, its not fair to lump together all revenue-eroding bills or spending bills as if Congress would have enacted all of them without deliberation. Lest we forget, the Committee on Ways and Means routinely removes tax exemptions and extra tax incentives in proposed bills, and instead aligns them with the tax code. The Committee on Appropriations, which I am Vice Chair of, also routinely deletes special appropriations from revenue-negative bills. 

We have partnered with the DOF on the entire tax reform program as well as its economic recovery plan. Every single comment that the DOF submits to the House tax committee is listened to, and if we do not adopt their recommendation, at the very least we try to compromise. So, I hope we can avoid aimless finger pointing. The challenge now is to outgrow the debt, and we need to work together. 

On media reporting of the debt

I also wanted to make a point about the reporting of our debt figures, because I think that is where this statement from Gil Beltran is coming from. Headlines frequently emphasize that we are now at “record-high” debt. That paints an overly alarmist picture, and the raw figure itself is not very helpful or enlightening.

What should matter is whether our debt is growing faster than the size of our economy. Because if we are significantly outpacing debt growth, it means we are spending our borrowings right — and we can pay our debts well. 

It doesn’t matter a lot how much a country borrows. What matters is how much it borrows relative to how much it earns. We are at around 61% debt-to-GDP. That’s high, but not too high, especially given our recent GDP growth rate. PGMA spent the entirety of her first term with continually rising debt levels above 60%, which prompted us to undertake the RVAT reforms that, in turn, saved us from fiscal crisis in time for PNOY to benefit from expanded fiscal space. 

Our debt-to-GDP level is expected to decline every year from 2023. And credit rating agencies have suggested that as long as our fiscal conditions do not deteriorate, we should be okay. So, as long as we can keep this level going down, and make enough fiscal space for surprise events, we wouldn’t be in deep trouble.

My own take is, let’s create the additional fiscal space (my estimate is around P326 billion annually, eventually) so that we can keep funding BBB, UHC, Free College, 4Ps, and other social and economic services that are important to our people, without funding debt service with more debt. I will work with the new economic team to figure that out.

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