By Mayvelin U. Caraballo, August 9 2018; the Manila Times
Image Credit to GMA Network
THE Philippines’ investment grade credit rating will be at risk if the current draft of a proposed federal government is approved, Finance Secretary Carlos Dominguez 3rd warned lawmakers on Wednesday.
At the continuation of a Development Budget Coordination Committee briefing at the Senate, Dominguez said framers of the draft federal constitution did consider how the national debt would be paid under the new system.
“I sat with the members of the Consultative Committee and my first question was, how would they see that the national debt will be paid? They said don’t worry about that but I said it’s not in the draft,’” he said.
“We don’t know what the final roadmap is going to look like. I had a long discussion with them and quite frankly, I
was more confused than when I started. It’s good that its being discussed now,” the Finance chief added.
Dominguez also said he would “absolutely” vote against the draft if it would be presented in a plebiscite.
He also told senators that the government would also incur”a very large budget deficit” if a court ruling providing for a higher revenue share for local governments is implemented.
At the moment, the budget deficit program has been set at P523.682 billion or 3 percent of gross domestic product for 2018, P624.370 billion or 3.2 percent for 2019, and 3 percent for 2020-2022.
This entails that the country’s investment grade credit standing from major debt watchers “will go to hell,” Dominguez claimed.
Credit rater Moody’s Investor Service has warned that charter change is one of the downside risks to the Philippine economy.
Meanwhile, Socioeconomic Planning Secretary Ernesto Pernia also said that a shift to federal system would have a direct additional cost of as much as P131 billion for the government.
“The rough estimate of NEDA (National Economic and Development Authority) is P120 billion, but this is just the direct cost,” he told legislators. ”
In an ambush interview on the sidelines of the briefing, Pernia clarified that the direct cost of running the government under federal system could go as high as P131 billion.