By Siegfrid Alegado and Cecilia Yap
The Philippines’ incoming finance secretary said tax administration, rather than new taxes, is the first priority to raise government revenue under a coming fiscal consolidation plan.
“We will focus on tax administration first and foremost” in the early part of the six-year plan, Benjamin Diokno said in an interview with Bloomberg TV’s Haslinda Amin and Rishaad Salamat on Wednesday. “We need a lot of money to continue our growth momentum” and will focus on public-private partnerships to move forward already planned infrastructure projects.
Diokno, who this week steps down as central bank governor to become the nation’s finance chief, will be tasked with finding funds for President-elect Ferdinand Marcos Jr.’s programs to support the economy’s expansion by at least 6% and curb inflation. It’s a big ask, after the pandemic pushed the nation’s debt-to-GDP ratio past the 60% level that market watchers typically consider as acceptable.
Many Asian economies are narrowing their fiscal support against rising prices to ease the strain on their pandemic-battered budgets. In the Philippines, incoming officials have preferred targeted support programs over wide-scale subsidies and excise tax suspensions.
The Philippines’ economy in the second quarter is expected to have outpaced the 8.3% expansion of the first quarter, Diokno said, adding that he sees a long-term growth trajectory of 6%, which may “easily” get the debt-to-GDP ratio back to around 60% in two to three years.
Diokno, who has said he will continue to sit on the central bank’s board, also contends with rising borrowing costs as the monetary authority’s rate tightening gains pace. His successor, Felipe Medalla, has signaled a follow-through rate hike in August.
Like much of Southeast Asia, the Philippines’ pace of rate tightening is slower compared to the Federal Reserve, helping push the peso this month to its weakest against the greenback since 2005. The currency was down 0.5% to 55.04 per dollar as of 10:49 a.m. local time.
“We don’t have to keep pace with the Fed,” Diokno said Wednesday. “Their problems are much more difficult than our problems,” citing faster US inflation and a lower benchmark interest rate.
The peso is depreciating along with other regional currencies, he said, adding that the central bank lets the currency seek its own level and only intervenes in the foreign exchange market to smoothen excessive volatility.
© 2022 Bloomberg L.P.