The government is willing to tap all sources to fund its programs aimed at mitigating the negative impact of the coronavirus disease 2019 (Covid-19) pandemic on Filipinos and the Philippine economy, Finance Secretary Carlos Dominguez 3rd said on Wednesday.
In a video call, Dominguez told reporters “we have to do all it takes to achieve three goals: support all Filipinos who lost their livelihood; protect frontliners in this battle against Covid 19; and support the entire economy.”
These are the reasons behind the special powers granted by Congress to President Rodrigo Duterte, he said.
According to the Department of Finance, the President can tap all available state resources to contain the spread of Covid-19 and provide subsidies of between P5,000 and P8,000 to poor and low-income households, depending on the prevailing minimum wage rates in their regions; additional risk allowance for frontline healthcare personnel on top of their hazard pay; and compensation for these workers infected by Covid-19 and the families of those who died in the line of duty.
In terms of support for the economy, Dominguez said the Bangko Sentral ng Pilipinas already supported the government by purchasing P300 billion worth of securities under a repurchase agreement with the Bureau of the Treasury.
The central bank also freed up more liquidity to the financial market by slashing banks’ reserve requirement ratio or RRR by 200 basis points to 12 percent, he added.
RRR is the proportion of current deposits that banks need to keep with the central bank against the sum they can loan out to borrowers.
The Finance department, Dominguez said, is also looking for funds in terms of grants and loans from multilateral and bilateral partners to support the government’s budget against the pandemic.
“[How] much are we willing to borrow? I tell you: We are willing to do [that] as much as it takes,” he added.
The Finance chief said the government was looking to borrow as much as $2 billion from multilateral agencies, including the World Bank, the Asian Development Bank and the China-backed Asian Infrastructure Investment Bank.
Regarding bilateral partners, he said the government was in “continuous talks with them. But again, we have to realize that they, too, are [under] lockdowns… and they are also trying to address their domestic situations.”
These borrowings are necessary to maintain the pace of government spending, he explained, since revenues are expected to drop due to economic disruptions caused by the coronavirus’ spread.
State revenues are projected to drop by P286 billion if the economy posted zero growth this year or by P381 billion if growth contracted by 1 percent.
The Development Budget Coordination Committee expected these revenues to hit P3.49 trillion this year, while disbursements are projected to reach P4.16 trillion.
“Those are roughly the numbers, but at this point, we don’t even have a very good estimate of what the GDP (gross domestic product) is going to look like. According to the NEDA (National Economic and Development Authority), it can be -0.66 percent to +4.3 percent,” Dominguez said.
The NEDA’s estimates compare with the government’s GDP growth target of 6.5 to 7.5 percent this year.
All these measures, Dominguez said, are likely to result in a budget deficit-to-GDP ratio of more than 4 percent this year, wider than the 3.2-percent ceiling set by the government.