Record debt not due to COVID-19 response

March 5, 2022

by IBON Foundation

Research group IBON belied claims that the government’s COVID-19 response is behind ballooning Philippine debt. The group stressed that the Duterte administration has been spending much more on infrastructure and debt payments than on COVID-19 response since the pandemic hit. It did not change its priorities despite urgent pandemic needs and, if anything, only used COVID-19 response to cover up massive borrowings for continued debt servicing and infrastructure.

The Bureau of Treasury just reported that national government outstanding debt has reached Php12.03 trillion as of end-January 2022. The economic managers repeatedly justify its borrowing as necessary for COVID-19 response.

IBON however noted that while the government had gross borrowings of Php5.3-trillion in 2020 to 2021, only Php570 billion has been reported as disbursed for COVID-19 response as of September 2021.

In contrast, IBON pointed out, the Duterte administration spent Php1.84 trillion for infrastructure and Php2.17 trillion in debt servicing, of which Php809 billion was for interest payments and Php1.36 trillion for amortization. This is over seven times what was reported spent on COVID-19 response.

The economic managers also press the false narrative that its COVID-19 response bloats debt by claiming that there is US$25.7 billion in foreign financing for pandemic response. Yet IBON said that looking at the details of the loans will show that only around US$5.6 billion (23% of the total) is specifically for COVID-19 response.

Of the balance, US$13.3 billion (51%) is not necessarily for COVID-19 and just goes to the overall budget and can be spent on non-COVID-19 expenses. This includes US$11 billion in global bonds that are not COVID-19-specific.

Meanwhile, said the group, there is US$6.8 billion (26%) that is definitely not for COVID-19 including loans for infrastructure financing, private participation in infrastructure, financial sector reforms, inclusive finance, parcelization of lands, and other unrelated matters.

IBON said that it is clear how the Duterte government has refused to spend sufficiently on the people’s most urgent pandemic-related needs such as strengthening the health system, giving ayuda to support distressed families, and subsidies for farmers and micro, small and medium enterprises (MSMEs). The single-biggest expense item of Php234B for emergency cash assistance was grossly lacking and given only for a few months in 2020.

The unchanged large spending on infrastructure is inappropriate because much of this was spent abroad on expensive imported materials, equipment and contractors instead of being spent locally. Putting the same amount in people’s pockets and supporting domestic MSMEs would have had a much bigger multiplier effect than leakages abroad. The even larger amounts for debt servicing are even more unproductive in that sense with no multiplier effects at all.

The economic managers also seem set to add insult to injury, IBON said. The finance department is lining up regressive indirect consumption tax measures that will weigh heavily on poor and vulnerable households who will be made to pay for debt that they did not benefit from. ###