‘Deficit-to-GDP ratio, fiscal data improving’

THE Department of Finance (DOF) said the government’s fiscal indicators are improving as the increase in the deficit to GDP ratio slowed and revenue generating agencies hit double-digit growth in their collections.

Finance Secretary Benjamin E. Diokno told reporters on Thursday that the national government’s deficit as percent of GDP for the first three quarters slowed to 6.5 percent from 8.3 percent a year ago.

He added that for the 10-month period, the Bureau of Internal Revenue (BIR) also collected P1.9 trillion, up by 12.6 percent while the Bureau of Customs (BOC) increased its collections by 35.8 percent to P713.5 billion in the same period.

“Tax effort, defined as taxes as percent of GDP, rose to 15.3 percent from 14.8 percent in 2021,” Diokno told reporters via Viber.

Climate risk

Meanwhile, Diokno urged climate experts and leaders from the public, private, and development sectors to invest in adaptation to reduce climate risks and disasters.

“We must urgently increase the availability of adaptation and resilience finance, particularly for sustainable and climate-resilient infrastructure,” Diokno said at the recent Climate Investment Forum organized by the Climate Change Commission (CCC).

The country’s high exposure to climate and disaster risks, he stressed, has pushed the government to be more proactive in prioritizing disaster risks and climate change impacts.

As such, the Department of Finance (DOF) proposed a three-pronged blended approach of grants, investments, and subsidies as modalities of climate finance.

This considers the private sector, multilateral development banks (MDBs), and global financial regulatory bodies as vital partners in the mobilization of financing for adaptation and mitigation projects.

The government also continues to seek support from international channels and partners to ensure sufficient fiscal space in addressing the climate crisis.

The Philippines submitted its first nationally determined contribution or NDC in April 2021.

“The first NDC commits to a projected greenhouse gas emission reduction and avoidance of 75 percent, representing the country’s ambition for GHG mitigation by 2030 for the agriculture, waste, industry, transport, and energy sectors,” he explained.

He called the private sector an important pillar in a just transition to a low-carbon economy through energy transition, technology development and deployment, and building of climate-resilient communities, with due regard to natural resources and ecosystem integrity.

To encourage private sector participation, the DOF and the Bangko Sentral ng Pilipinas (BSP) have also established a sustainable finance ecosystem to synergize public and private investments in green projects and create the environment for greener policies.

SEC guidance

Meanwhile, the Securities and Exchange Commission (SEC) has released guidelines on the issuance of Green Bonds under the Asean Green Bonds Standards.

“This provides a reference point for determining the eligibility of green projects covering renewable energy, energy efficiency, pollution prevention and control, environmentally-sustainable management of living natural resources and land use, clean transportation, and adaptation of green infrastructure,” Diokno said.

The government has also developed the Sustainable Finance Framework laying down the process for ensuring transparency and disclosure of the use of proceeds, as well as the expected environmental and social impact of eligible green and social projects, in keeping with international best practices.

“These efforts have helped us successfully issue our first-ever sustainability global bonds worth $1 billion, and sustainability samurai bonds worth $600 million,” Diokno said.

Mandanas ruling

The DOF also called on local government units (LGUs) to optimize their increased transfers from the Mandanas ruling in setting up plans on capital investments to address basic and growing needs of their constituents.

 EO No. 138, s. 2021 strengthens the autonomy of LGUs, granting them, among others, the ability to borrow resources to improve local facilities and services.

“[A]s we implement the full devolution of certain functions from the executive branch to local governments pursuant to EO Number 138, series of 2021, local government units are confronted with the challenge of funding the expanded scope of basic services and local development projects. It is therefore imperative that LGUs put in place plans on capital investments,” said Diokno.

However, data showed that LGUs had a low appetite for borrowing. In the past five years, only around 62 percent of LGUs have availed themselves of credit. For 2021, LGU borrowings only amounted to P136.6 billion or around 0.74 percent of the country’s GDP.

The Bureau of Local Government Finance (BLGF), tasked to monitor and evaluate LGU borrowings, noted that LGUs were only able to utilize 51.5 percent of their borrowing capacity in the past five years.

These were most commonly used for the construction of local government buildings and roads, acquisition of lots, and procurement of heavy equipment.

To encourage local borrowing, the BLGF issued the Certificate of Net Debt Service Ceiling and Borrowing Capacity to establish a maximum credit amount that LGUs can refer to.

The initiative is part of the government’s engagement with the World Bank Group where LGUs, especially city government stakeholders, are given access to knowledge and tools to design creditworthy local strategies in planning and implementing capital investment projects, said Diokno.

Image credits: Joseph Vidal/Senate PRIB