Dominguez not amenable to budget deficit beyond 3% of GDP

By Joann Villanueva

August 28, 2018, 5:51 pm

MANILA -- Finance Secretary Carlos Dominguez on Tuesday said he is willing to accept changes in the proposed tax reform measures but not the change in the deficit ceiling, which was placed at three percent of the country's gross domestic product (GDP).

During the 2nd Economic Journalists Association of the Philippines (EJAP) Forum, Dominguez admitted that all moves to reform the tax system face hurdles.

Expected revenues from the first tax reform package, signed into law in December 2017 and now called the Tax Reform for Acceleration and Inclusion (TRAIN) Act, is around PHP90 billion, lower than the projected PHP130 billion under the proposal by the Department of Finance (DOF) because of some changes introduced by legislators.

Dominguez said the lower-than-expected revenues is acceptable since this remains a plus for the government. “In a democracy, many people have many ideas so we must listen to different ideas that are put out there,” he said.

Gains from tax reform measures are primarily targeted to finance the government’s massive infrastructure program, which has been put in place to improve infrastructure in the country and ensure the sustained growth of the domestic economy.

Under the infrastructure program called “Build, Build, Build” the government plans to invest at least PHP8 trillion until the end of its term in 2022.

The bulk of these projects are targeted to be financed through official development assistance (ODA) loans.

Economic managers have set the government’s budget gap to three percent of GDP to allow for increased spending for infrastructure.

However, Dominguez said the deficit cap must not exceed three percent of domestic output. “We will not prejudice the entire economy by exceeding three percent or around that area,” he added.

Budget and Management Secretary Benjamin Diokno, during the same event, said the current deficit ceiling, which is higher than the two percent earlier set by economic managers, is acceptable to foreign investors. “Investors welcome it,” he said.

Also, the Department of Budget and Management (DBM) chief said the government remain open to public-private partnership (PPP) to implement the government’s priority infrastructure program. “PPP is still there. It’s still an option,” he said,

Of the 75 projects identified as priority under BBB, Diokno said 48 will be funded by ODA, 12 through the General Appropriation Act (GAA), seven by the Asian Development Bank (ADB), six through PPP, and one each will be financed by the World Bank (WB) and a private loan, he added. (PNA)