Metro Manila (CNN Philippines, May 6) – Finance Secretary Carlos Dominguez III has cancelled a plan to seek from Congress a supplemental budget to partly bankroll the government’s ₱1.49 trillion socioeconomic strategy this year versus COVID-19.
Dominguez made the remarks as Congress resumes its session this week to discuss, among others, measures to prop up the economy amid the rampaging global health crisis.
“We have to be very careful in asking for supplemental budget because actually we don’t have supplemental revenue. So we will strive to live within the ₱4.1 trillion budget this year and so far, we have been okay. We will be okay with that,” Dominguez said in a media briefing on Wednesday.
The realignment of sizeable amounts from several items in the 2020 budget to programs aimed at cushioning the impact of the COVID-19 crisis, along with financing deals being worked out with bilateral partners, diminished the need for a supplemental budget, according to Dominguez.
Dominguez said the government is in “very early stages” of negotiations for project-based financing deals with Japan, South Korea, China and France.
Earlier the government tapped multilateral lenders World Bank and the Asian Development Bank for loans and grants to support its cash aid initiative, the building of coronavirus testing laboratories and for other welfare spending.
It also secured a ₱300 billion credit line from the Bangko Sentral ng Pilipinas through the issuance of bonds, while state-owned and controlled corporations have remitted over ₱120 billion in dividends.
It’s not clear how much the government has raised so far, the amounts it is still negotiating and how it can exactly fill whatever financing gap that’s left. Dominguez only said a breakdown of the funds it has raised as of end-April will be out soon.
“It’s been difficult because we had to reallocate from past priorities to new priorities but that’s the reality of the situation,” he added.
Tax revenues that could cover the programmed expenditures are expected to fall below official targets. This is because the ban on liquor and cigarettes during the quarantine period made a dent on sin tax collections.
The government’s collections from the value added tax, other sales taxes and the tax on sugary drinks will also take a hit amid falling consumer demand, the Finance chief said.
With COVID-19 expenditures throwing the original spending plan off the course, and revenue collection failing to keep up, the Philippine budget deficit could now widen to “around a trillion pesos,” Dominguez said.
The 2020 national budget wants the deficit contained at ₱677.6 billion, or 3.2 percent of the value of all goods and services produced by the economy, as measured by the gross domestic product.
Still, a wider deficit is not a major concern yet for an economy that has put its finances in order in the past decade with falling debt ratios relative to GDP, according to Dominguez.
“We are exactly where we want to be,” he said, referring to managing state finances. “The first number you have to figure out is what exactly is going to be our deficit for the year. And our estimates is about a trillion pesos.”
CITIRA bill up for revision
While the supplemental budget is now out of the question, the Finance department wants a proposed tax legislation immediately passed by Congress instead: the Corporate Income Tax and Incentives Reform Act (CITIRA).
Dominguez last month said CITIRA can serve as a stimulus for the economy after pandemic. Lower taxes, he reckoned, could encourage companies to invest more and create jobs.
The version pending in Congress aims to cut the tax to 20 percent of company earnings from the current 30 percent, the highest in Southeast Asia. The tax cuts will be made on a staggered basis over a 10-year period.
On Wednesday, Dominguez said companies may not have to wait that long.
“We’re willing to look at it. And most likely cut it further more quickly than originally planned,” he said.
