Finance Secretary Carlos Dominguez III said he expects the Duterte administration’s “Build, Build, Build” program to shift to high gear starting this year with the rollout of the first set of big-ticket infrastructure projects and the implementation of the Tax Reform for Acceleration and Inclusion (TRAIN) that will help support this infra buildup.
He said funding support from the additional revenues to be raised from the TRAIN will be complemented by concessional financing packages from the Philippines’ development partners, which would be well managed to ensure fiscal stability given the country’s declining debt-to-GDP ratio.
“I am sure the projects that have been planned for the DPWH (Department of Public Works and Highways) are going to go into high gear now that we have basically our capital already, our own funding for our portion of these projects,” Dominguez said, referring to the recent implementation of the TRAIN.
“And I guess this will also encourage the multilateral agencies and the other funding agencies to increase their lending to us,” he added.
Dominguez noted the expansion of the Clark International Airport in Pampanga through the construction of a new, state-of-the-art passenger terminal has already broken ground in a record 18 months from the time President Duterte assumed office, while the implementation of the PNR North 2 project that will connect Metro Manila to the Clark airport and eventually to the PNR South Commuter Rail in Los Banos, Laguna is set to start later this year, among other big-ticket infra projects that will commence in 2018.
“Let me just point out that our debt as a percentage of our GDP has been on a steady decline. When we took over, it was something like 43 percent. Even though we borrowed more during the interim from when the time this new administration took over, the debt as a percentage of GDP is now just slightly over 41 percent. And we can see that declining over the years,” the finance chief said.
According to Dominguez, about a fourth of the capital needed for the government’s P8.44 trillion infrastructure modernization program will come from TRAIN revenues, while the rest will be funded by Official Development Assistance (ODA) loans.
In an economic bulletin issued by the Department of Finance last November, Undersecretary and Chief Economist Gil Beltran said the debt-to-GDP ratio dropped to 41.7 percent in the third quarter of 2017 from 42.4 percent in the previous quarter and from 43 percent in the third quarter of 2016.
For end-2017, Beltran said in a later economic bulletin issued on Jan. 30, 2018 that the proportion of the national government debt to GDP “has been maintained at 42.1% as nominal GDP also surged by 9.1%.”
”From a high of nearly 75% in 2004, debt-GDP ratio was drastically reduced to below 45%, owing to prudent debt management, fiscal discipline, and economic growth. The economy has been outgrowing debt in the past years, meaning, the country’s capacity to service its debt has been improving,” Beltran said.
Beltran said “in the short-term, the government’s ‘Build Build Build’ Program may exert upward pressure on the debt stock. In the medium- to long-term, however, a sustainable high economic growth rate (brought about by better infrastructure) will outrun the growth of debt.”
About 70 percent of the incremental revenues from the TRAIN have been earmarked for infrastructure, and up to 30 percent for social services, including unconditional cash transfers of P200 a month (or P2,400 per year) for the country’s 10 million poorest households for 2018, which will increase to P300 a month (or P3,600 per year) in 2019 and 2020.
Besides the incremental revenues from TRAIN, Dominguez is also banking on the remarkable improvements in the collection efficiency by the Bureaus of Internal Revenue (BIR) and of Customs (BOC), as reflected in their respective high accomplishment rates in 2017.
For 2017, the BIR achieved 97.18 percent of its revenue goal of P1.829 trillion, collecting a total of P1.777 trillion. The BOC collected P457.553 billion in 2017 as against a revenue target of P467.896 billion, representing an accomplishment rate of 97.7 percent in 2017.
Beltran earlier said majority of the 75 flagship projects under the “Build, Build Build” program worth P1.8 trillion combined are already in the construction or pre-construction phases.
Among these big-ticket projects are the P23-billion Metro Manila Flood Management Project, which is co-funded by the Asian Infrastructure Investment Bank (AIIB) and the World Bank; the P151-billion Philippine National Railways (PNR) South Long Haul Line to be financed by Official Development Assistance (ODA) from China and the P355.6-billion Mega Manila Subway funded by ODA from Japan, Beltran said.
Dominguez added the P19.8 billion Davao City Bypass Road, another flagship project, is also under the implementation phase.