With less than five months left in office, Finance Secretary Carlos Dominguez III on Friday proposed new taxes or increases to pay foreign debts incurred by the Duterte administration to deal with the COVID-19 pandemic.
“We are very confident that 2022 will be the year we get back to normal,” he said in an interview with CNBC.
Dominguez said mass government vaccination would pave the way for the reopening of more productive economic sectors to achieve gross domestic product (GDP) growth of 7-9% this year.
But the Duterte administration has just 132 days left in office and the next administration will have to deal with debt incurred by the government for vaccines and other needs during the pandemic.
In total, the Philippines borrowed $2 billion (more than 102 billion pesos) — $1.2 billion for vaccines and $800 million for boosters and pediatric injections — from three multilateral banks in the year last.
High debt-to-GDP ratio
It has also borrowed from bilateral partners such as Japan and South Korea to finance the deployment, including logistics and equipment like cold storage needed for the vaccination program.
At the end of 2021, the Philippines’ public debt-to-GDP ratio hit a 16-year high of 60.5%, surpassing the 60% threshold deemed manageable for emerging markets.
But Dominguez argued that “the peak of our debt-to-GDP ratio is quite affordable and well within the experience of our rating peers” or other economies, which have similar quality credit ratings to the Philippines. .
Although Dominguez did not specify what new or higher taxes might be included, he told CNBC that the fiscal consolidation program would be discussed with all presidential candidates.
“We are ready to brief all presidential candidates and their economic teams, and we will present them with ideas on how to manage the growing debt,” Dominguez said.
Department of Finance (DOF) officials had said the next administration could focus on “relatively untaxed” sectors.
Carbon tax in sight
For example, the viability of the carbon tax, a levy on cryptocurrencies, the removal of all exemptions from paying the 12% value added tax, as well as further increases in excise duties on cigarettes , e-cigarettes, alcoholic beverages, and sugary drinks were currently under investigation and study.
Dominguez expects a smooth transition to the next administration, much like previous swings from president to president since 1986.
“We have a history of orderly and peaceful transfers of power. We have already prepared our transition documents for the next administration,” he said.
In another statement published by the Bangko Sentral ng Pilipinas, Dominguez reportedly said recent reforms and bureaucratic continuity will help the next administration maintain strong macroeconomic fundamentals.
“The deep bench of technocrats who have helped guide economic policies will remain beyond June 2022 and would help ensure the continued pursuit of structural reforms,” he said.
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