NextGen Day

Government debt and its proportion of domestic economic production increased last year as a result of pandemic-related expenditure, according to DOF Secretary Carlos Dominguez III, but the situation remained financially feasible and sustainable.

Dominguez stated during a virtual House of Representatives Ways and Means Committee briefing that the country’s debt to gross domestic product (GDP) ratio increased 15 percentage points last year from a pre-pandemic low of 39.6 percent.

“It’s worth noting that government expenditure accounts for about 25% of our domestic economy. The domestic economy would have imploded if we had not increased governmental expenditure via borrowing. Our people would have suffered much more as a result of this event,” he added.

Last year, the government borrowed PHP2.7 trillion, with the bulk of the funds coming from domestic sources.

Dominguez said that it is the appropriate moment to borrow “to finance our people’s demands,” but added that “we must utilize borrowings prudently” by expanding the capacity of the healthcare system and the productive sectors.

He said, “If we don’t do these things, the economy would collapse much worse.”

Dominguez also emphasized the need of spending intelligently, particularly on infrastructure projects, since “infrastructure investments have the greatest multiplier impact on economic growth.”

The administration promoted its “Build, Build, Build” infrastructure initiative as a top priority for ensuring domestic growth’s long-term viability.

Infrastructure investment has risen to approximately 5% of GDP during the present administration, up from around 2.8 percent under prior administrations.

The funding scheme, according to Dominguez, will remain sustainable, and borrowing will be smart to finance both economic investments and pandemic-related initiatives.

Given the strong liquidity position in the economy, he believes domestic borrowings will continue to account for the majority of financing.

“Both the Department of Finance and the Bangko Sentral ng Pilipinas are working together to keep our fiscal and monetary instruments sharp and ready, even in the event of a long-term global health crisis,” he said.

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