Prosperity agenda: Bigger budget, higher debt

The proposed 2025 national budget is geared toward sustaining the country’s economic momentum, building on the economic gains made in the first two years of the Marcos administration.

It’s hard to argue with that, especially when the ballooning expenditures are couched in lofty terms such as a “prosperous, inclusive, and resilient Philippines—where all Filipinos can fulfill their individual and shared aspirations.”

The quoted text is from the Department of Budget and Management’s briefer on the budget titled, “Agenda for Prosperity: Fulfilling the needs and aspirations of the Filipino people.”

It’s tempting to uncover what this prosperity agenda is all about, given the egregious P64 per person per day poverty threshold being used by the government to lower the definition of “food-poor” among us. It deserves a separate column because of the threshold’s huge implications on the prioritization of government resources when it comes to combating hunger and poverty, and the identification of the poorest and the marginalized sectors of our society where social safety nets are most needed.

For now, our policymakers who are currently deliberating on the budget bill are concerned with two things: the specific budgetary items in the proposed P6.352 trillion 2025 budget and the funding source. Over half of the proposed National Expenditure Program (NEP) for next year is allocated to social and economic services (62.6 percent). The rest will go to general public services (P1.083 trillion or 17.1 percent), defense (P419.3 billion or 6.6 percent), and debt burden (P876.7 billion or 13.8 percent). The top two sectors receiving the lion’s share are education (P977.6 billion) and public works (P900 billion).

Speaker Martin Romualdez was quick to urge the chamber to pass the budget bill by September so that it could be transmitted to the Senate before the congressional break. Romualdez expected his colleagues to prioritize quality education, expanded health care, and social protection when scrutinizing the 2025 NEP.

Senate President Francis Escudero is in favor of the government putting more money into both capital resources (roads, airports, and bridges) and human capital (education). Escudero told this columnist that by investing both in human capital and infrastructure, which are the two drivers of gross domestic product (GDP) growth, the country is headed in the right direction.

More borrowings. Is it possible for the Philippines to sustain an annual budget that grows every year, which only adds to our debt? The national debt stands at P15.48 trillion by the end of June 2024, representing a 9.4-percent increase from P14.15 trillion during the same period in 2023. In the first half of 2024, the ratio of debt to GDP was 60.9 percent.

What drives the government to keep borrowing instead of reducing its expenditures? The main reason is to maintain the current pace of growth, as GDP registered 5.6 percent in 2023.

Despite the ballooning debt, the government is spending more because infrastructure development will attract more investments. Increased economic activity leads to the creation of more jobs and businesses, which eventually propels GDP growth, where everyone is expected to benefit and prosper.

But the working class and lower-middle class are among those who would vehemently disagree with this prosperity-for-all projections. Besides the relative absence of the trickle-down effect of the economy, government spending that doesn’t directly impact taxpayers eats up a sizable chunk of the budgetary pie: confidential and intelligence funds, useless flood-control programs, corruption-prone pork barrel funds of lawmakers, inadequate and politicized distribution of livelihood and medical assistance, and meager Philippine Health Insurance Corp. coverage, to name a few.

The other reason for the increasing debt level is revenue shortfall, which cannot sustain government projects and programs without resorting to borrowing. The third reason is endemic corruption, which undermines the revenue-generating efforts of the bureaus of internal revenue and customs.

For the debt-to-GDP ratio to be sustainable, the economy must continue to grow at 6 percent yearly until 2028, when the economy will be worth P36.9 trillion, according to the Bureau of Treasury. This will translate to a lower debt level—56.3 percent of the GDP from the current 60.9 percent (as of end-June).

But did the economic managers consider the increasing impacts of climate change on people’s lives and livelihoods in their optimistic predictions? Our pursuit of rapid economic development is largely responsible for environmental damage, which is the most worrisome of all. To ensure environmental sustainability, the government must uphold the mantra of triple bottom line: profit, people, and planet.

For a deeper dive into our debt stock and projections for possibly reining in debt by 2028, check out this special report (https://tinyurl.com/3ra9e3vt) through the Inquirer Mobile app.

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Comments: mubac@inquirer.com.ph