Debt-to-GDP ratio to fall to 35% by 2022

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The ratio of government debt to the country’s gross domestic product (GDP) is projected to fall to 35 percent by end of the Duterte administration in 2022, says National Treasurer Roberto Tan.

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With the budget-deficit ceiling targeted at 3 percent of GDP the government will be able to sustain the drop in the debt-to-GDP ratios, he said during a conference call with local and foreign portfolio investors and fund managers on August 16.

The national government debt as a proportion of GDP had dropped continually from 52.4 percent in 2010 to 44.8 percent by the end of 2015.

The outstanding debt of the national government, Tan said, was now projected to settle at 42.66 percent of GDP this year and 40.86 percent in 2017.

Meanwhile, according to Finance Secretary Carlos Dominguez 3rd, the intended spike in public spending during the Duterte administration will go hand in hand with strict observance of fiscal discipline.

In particular, he said, the targeted budget-deficit ceiling of 3 percent of GDP up to 2022 would be strictly observed.

“We are fortunate that the last two administrations have managed government finances well, as this has given us headroom for higher public spending… We will absolutely make sure we do not breach the deficit ceiling,” Dominguez said.

The deficit-to-GDP ceiling of 3 percent set by President Rodrigo Duterte’s economic team is a percentage point higher than the 2-percent limit observed under the previous administration.

The new economic team cited plans to significantly boost government spending on infrastructure, which Dominguez described as the country’s next pillar of growth, and social services for the decision to raise the deficit ceiling.

Infrastructure spending will cover sub-areas such as logistics and transportation, information technology, telecommunications, and power.

It will also focus on areas outside Metro Manila to achieve a geographically broad-based economic growth. Significantly higher government spending, the economic team thinks, is indispensable if the government is to achieve economic growth truly inclusive and if the goal of reducing poverty incidence in the country, from 26.3 percent in the first semester of 2015 to just 17 percent by 2022, is to be realized.

To make sure that breaching the deficit ceiling is avoided despite aggressive spending plans, Dominguez said, the Department of Finance (DOF) and its attached agencies have set their eyes on revenue-generation measures.

These measures include strengthening tax collections and preventing tax evasion, by pushing for relaxation of the bank secretary law and lobbying for inclusion of tax evasion among predicate crimes for money laundering.

At the same time, the DOF is keen on addressing red tape everywhere, including in its attached agencies—the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC)—in order to make it easier for individuals and businesses to pay taxes and customs duties.

Dominguez shared with the conference call participants the DOF’s recent move to create an anti-red tape team headed by Finance Undersecretary Gil Beltran. The team is tasked to streamline processes in the DOF, BIR, and BOC to encourage payment of proper taxes and duties.

Also, the strengthening of anti-corruption drive within the BIR and the BOC, led by Commissioners Caesar Dulay and Nicanor Faeldon, respectively, is expected to help shore up tax collection.

“We will improve efficiency of our revenue collecting agencies… and move quickly to reduce corruption,” Dominguez said.

Credit Suisse arranged the conference call for its clients, in coordination with the Investor Relations Office (IRO). More than 70 financial market players from Manila, Hong Kong, Singapore, and Europe took part in it.

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