Carlos G. Dominguez
Secretary of Finance
Senate President Vicente Sotto III; Minority Floor Leader Franklin Drilon; Senator Ralph Recto; Senator Imee Marcos; Senator Francis Pangilinan; Senator Cynthia Villar; Senator Risa Hontiveros; Senator Richard Gordon; Senator Aquilino Pimentel III; Senator Pia Cayetano; Senator Panfilo Lacson; Senator Nancy Binay; Senator Bong Go; Senator Joel Villanueva; Secretary Avisado; Secretary Galvez; Secretary Duque; Secretary Locsin; fellow workers in government: Good morning.
The pandemic we have been battling since March of last year has been a contingency we could not have imagined, let alone provisioned for.
To meet the health emergency, the government had to quickly mobilize resources to support our health system, procure test kits in the millions, and deliver cash support to our most vulnerable citizens. All these required higher deficit spending that was magnified with the reduction in revenue flows due to the lockdowns that slowed down economic activity.
Over the past year-and-a-half, however, we never ran out of cash resources, notwithstanding the large spending bill that we incurred because of the pandemic. We covered the deficit with urgent borrowing, mainly with our development partners offering us very good rates and terms.
Despite the temporary surge in borrowings, our debt level remains manageable and we did not lose our exemplary credit ratings. This is due to the fiscal prudence and the tax and structural reforms which we together implemented since 2016. Our high credit ratings enabled us to access emergency financing at lower rates, tight spreads, and longer repayment periods.
This year, our budget gap is expected to widen to 1.86 trillion pesos, about 36 percent higher than last year. This is about 9.3 percent of our GDP. The larger budget deficit will require 3.1 trillion pesos in borrowings in 2021, roughly the same level as last year. These borrowings will be sourced mainly from the local markets at around 75 percent and 25 percent from abroad.
Our total debt as a share of GDP is expected to rise to 58.7 percent in 2021. This figure was 54.6 percent in 2020 and a historic low of 39.6 percent in 2019. Despite the increase, our prudent debt management gave us the fiscal headroom to deal with the pandemic. Thus, the anticipated temporary rise in debt remains within the prescribed bounds of fiscal viability.
Living and dealing with COVID-19 is a multi-mile marathon, not a 100-yard sprint. We need to continue exercising prudence in managing our financial affairs. We need to protect our fiscal sustainability and ensure we have an ample war chest for this long battle.
Financing our vaccine purchases is a specific subset of our overall fiscal management.
Our total budget for the procurement of vaccines amounts to 88.6 billion pesos.
This should be enough to procure about 148 million doses and inoculate at least 70 million Filipinos or 100 percent of our adult population.
Of the 88.6-billion peso funding, 2.5 billion pesos forms part of the budget of the Department of Health under the 2021 General Appropriations Act. Meanwhile, the 10 billion pesos are funds under the Bayanihan 2 law allocated for the COVID-19 vaccination program. The remaining 3.26 billion comes from other sources in the 2021 National Budget and the Bayanihan 2.
Around 57.3 billion pesos are sourced through concessional loans from our multilateral partners, such as the World Bank, the Asian Development Bank, and the Asian Infrastructure Investment Bank.
Up to 12.7 billion pesos will come from other financing sources as may be necessary while the 2.8 billion pesos, as mentioned, are from the contingency funds.
To ensure a more stable vaccine supply, a portfolio of six vaccine varieties is now being negotiated or has been negotiated with the manufacturers. These vaccines include Pfizer, Novavax, Moderna, Sinovac, Johnson & Johnson, and Sputnik-V.
As you may note from the enumeration of sources of funds, the bulk of our ready financing for vaccine procurement comes from loans extended by our multilateral partners.
We deliberately chose this financing strategy to ensure two things. First, that the vaccines we buy are internationally accepted, and have passed the stringent criteria for safety and effectiveness. Second, that the vaccine procurement is totally transparent. The loans follow a direct payment scheme as a disbursement method. This means that loan proceeds will be directly coursed from the lender to the vaccine manufacturers upon delivery.
Using our loans alone, we have so far contracted a total of 33.5 million doses worth about 639.8 million US dollars. This could inoculate close to 17 million Filipinos. The amount comprises 53 percent of the total available funding under our vaccine loans.
Additionally, we have reserved a total of 56 million doses through binding term sheets, which will be finalized through the execution of Supply Agreements with the vaccine manufacturers.
In sum, we are assured of around 89.5 million doses of vaccines using our foreign loans. These will be sufficient to inoculate at least 44.75 million Filipinos. In accordance with the terms of the signed Supply Agreements, we have already paid a total amount of 243.25 million US dollars.
On top of these, the government is securing additional doses through the COVAX facility. The current guidance from COVAX estimates that up to 44 million doses will be donated to the Philippines. The decision taken during the G-7 summit this weekend for the rich countries to donate a billion doses to COVAX could significantly increase our allocation.
Moreover, Japan Foreign Minister Toshimitsu Motegi just announced this morning the donation of Japan-made AstraZeneca vaccines to some countries, including the Philippines. We have not yet been officially informed of the number of doses that are going to be donated by Japan.
Added to this is the one million doses of Sinovac vaccines donated by the Chinese Government.
Using our regular budget, the national government has secured a total of 15.5 million doses of vaccines in the amount of 176.5 million US dollars.
In sum, the government is assured of at least 149.83 million doses of vaccines through binding term sheets and supply agreements backed by our foreign loans, our regular budget, and donations from other countries and the COVAX facility. Out of this number, more than 12.7 million has so far been delivered to the Philippines.
Local governments and private sector groups will even complement the national government’s vaccine procurement. The COVID-19 Vaccination Program law has in fact allowed them to purchase up to 24.9 million doses. This will bring our indicative total of vaccines to about 174.7 million doses. Adding those in the pipeline, the vaccine deliveries could reach more than 204 million doses this year.
There is a second horizon we have to look at, however. We might need an allocation of about 25 billion pesos to cover the inoculation of children aged 12 years old and above. Pending confirmation of our health authorities, we are preparing for the purchase of booster shots of one dose for roughly 85 million adults and teenagers. This could cost roughly 60 billion pesos. The proposal is to include such supplemental amounts in the 2022 budget.
At the moment, we have enough money to fully scale up our vaccination program to the end of the current year.