Last Tuesday, Aug. 27, a magnificent document was released by seven former Finance officials, the “Statement of Former Secretaries of Finance on the Mobilization of Excess GOCC Funds.”
The signatories and their terms of office as Finance Secretary were Cesar E. A. Virata (1970-1986), Roberto de Ocampo (1994-1998), Jose T. Pardo (Jan. 2000 – Jan. 2001), Alberto G. Romulo (January – June 2001), Jose Isidro N. Camacho (2001-2003), Margarito B. Teves (2005-2010), and Cesar V. Purisima (February – July 2005; 2010-2016).
The officials declared with authority that “As former Secretaries of the Department of Finance (DoF), we fully understand and support the DoF’s exercise of its authority to effectively utilize the excess funds of government-owned or -controlled corporations (GOCCs) to finance crucial government projects in areas like health, education, social services, and infrastructure. We believe this move will bring substantial benefits to the Filipino people. Mobilizing these excess funds will enable important public projects that can strengthen our economy and ensure long-term gains through more jobs, higher incomes, and reduced poverty.”
Such a vote of confidence in the policy of current Finance Secretary Ralph G. Recto should quash any serious doubts about the efficiency and rationality of tapping the excess funds of the Philippine Health Insurance Corp. or PhilHealth (P90 billion) and the Philippine Deposit Insurance Corp. or PDIC (P110 billion), among others.
Congratulations, Messrs. Virata, De Ocampo, Pardo, Romulo, Camacho, Teves, and Purisima, for that concise and clear statement.
Disclosure: Former Secretary Gary Teves was my boss when I was working at the House of Representatives. He was a Congressman and Chairman of the Committee on Economic Affairs in the 1990s. Then when he put up a private consulting firm, Think Tank, Inc., which I worked at from late 1999 to 2004.
PROPOSED BUDGET 2025The proposed budget for 2025 is now undergoing review, agency by agency, both at the House and the Senate. The biggest expenditure areas in the budget are the departments of Public Works, Education, the Interior (including the Philippine National Police), Defense, Social Work, Health, Transportation, Agriculture, and the state universities.
For special purpose funds (SPVs), the biggest expense class, these are the allocations to local governments, the interest payment of our public debt, and subsidy to government corporations including PhilHealth (see Table 1).
Note the huge jump in interest payments, from P380 billion in 2020 to P430 billion in 2021, P503 billion in 2022, P628 billion in 2023, and a projected P670 billion this year. We spend hugely each year, beyond what domestic revenues can cover, so we have borrowed about P2 trillion/year from 2020 to 2023.
SPENDING REFORMS VIA NGPA AND NGRPThe Department of Budget and Management (DBM), as the disbursing office of the trillions of pesos in the annual budget as authorized and legislated by Congress, initiated reforms in public procurement via the newly enacted New Government Procurement Act of 2024 or NGPA (RA 12009). There is also a bill in Congress on the National Government Rightsizing Program (NGRP).
As an advocate of minimal government intervention and minimal taxes, I find these two measures worthy of support. The NGPA should lead to more transparency and reduced waste and corruption in government procurement of goods and services. Even non-participants and observers of government procurement contracts can have access to certain data via the NGPA microsite.
The NGRP is definitely needed, given the huge annual spending on government personnel services, which contributes to the high annual budget deficit and consequent large borrowings and high interest payments.
DBM Secretary Amenah F. Pangandaman said in a press statement the other week, that she wanted a reclassification of vacant positions in government agencies to ensure optimal utilization of manpower resources across the bureaucracy. She added that, “It’s not just removing and consolidating the agencies but at the same time fix[ing] the positions, do[ing] reclassifications within departments and agencies… to have a bureaucracy that is agile and responsive, not a government that is too bloated and the service is not good.”
Go for this, Madame Secretary. I hope that Congress will prioritize this bill this year.
RISING INTEREST PAYMENTSYesterday the Bureau of the Treasury released the cash operations report for the year until July. I have compared those numbers with those from January to July of preceding years. Among the things I discovered were the following.
There has been a significant increase in revenues, from P2.27 trillion in 2023 to P2.61 trillion in 2024, even without any major tax hikes. That high-growth Philippines is creating more jobs means more tax-paying businesses and labor.
Government expenditures are not slowing down but are keeping up with the rise in revenues, which should not be the case because we are not in any economic, or health, or political crisis.
Interest payments, in particular, are rising fast. The P457 billion released in January to July implies an average increase of P65.3 billion/month. If this trend continues, then the full-year interest payment in 2024 will be P783 billion, not the P670 billion as programmed in the 2024 budget.
The deficit is still far higher than the pre-lockdown level. In 2019 it was P118 billion, while it was P643 billion this year (see Table 2).
We need more economic growth from the private sector and less spending and borrowing in the public sector to significantly reduce the public debt stock. The call for patriotism should ring louder in the hearts of government personnel, particularly the military and uniformed personnel whose annual pension is rising consistently. This is because they do not contribute for their own personal pensions, and the irrational indexation of their pensions with the salaries of active personnel.
Together, the private and public sectors should sustain high economic growth while instilling fiscal discipline and restraint. Then attaining credit ratings of “A,” and lowering the debt/GDP ratio to below 56% and the poverty level to below 10% by 2028, should come handily.
Bienvenido S. Oplas, Jr. is the president of Bienvenido S. Oplas, Jr. Research Consultancy Services, and Minimal Government Thinkers. He is an international fellow of the Tholos Foundation.