By Rea Cu, Businessmirror, Aug 8, 2018
THE Philippines risks its positive credit rating status if fiscal issues, in line with the shift to a federal form of government, remain unaddressed, the Department of Finance (DOF) told legislators.
During a Senate Committee on Finance hearing on Wednesday, Finance Secretary Carlos G. Dominguez III told senators the government is not willing to risk the country’s positive credit rating status, which is important in terms of sustaining the growth of the economy.
“[It means] a very large deficit. Oh, [and] it [our credit rating] will go to hell. [Then] everybody pays higher interest rates,” Dominguez said.
It was pointed out during the hearing that if issues surrounding the shift to a federal form of government are not addressed, the country’s fiscal status would remain uncertain, with such uncertainty leading to a possible credit rating downgrade.
Asked by senators what the economic managers think of the draft federal constitution from the President’s Consultative Committee (Con-com), Dominguez described the draft as very confusing.
“As I said earlier, we are very confused by the draft. I don’t know [if it’s] much better; it depends on the final discussions and resolutions on the issues on federalism, it depends,” he added.
The revenue sharing for the national government and the local government units (LGUs) under a federal form of government, among others, should also be made clear in order to put up a more comprehensive budget plan.
“So I think there are a lot of issues that need to be worked out and it’s good that it’s being discussed publicly right now, and that’s just one of the issues that we see from the fiscal point of view. Again, Ernie [Pernia] is right, if we don’t manage this correctly, this can end up to be a fiscal nightmare. So I think the legislature in its wisdom can sort those issues out,” he said.
Not answering the issues would could also lead to a derailment of the Duterte administration’s “Build, Build, Build” (BBB) infrastructure program, which is eyed to usher in the golden age of infrastructure in the country.
Although the Duterte administration’s economic managers have yet to issue their cluster’s official position on the matter of federalism, the finance chief explained that the Federal Constitution should clearly explain who pays for what.
“I’m happy that it is being discussed now because the original draft…from the fiscal point of view leaves much to be desired. During a meeting with the members of the commission, I asked who is going to pay for the national debt? Who is going to pay for the military? Who is going to pay for the DFA [Department of Foreign Affairs] and the Central Bank, and if it needs additional capital, who is going to put that up? And the response was that the sharing with the LGUs of the states will be after those expenses. When I read the draft it doesn’t say so there, it just said 50 percent. So I said you know, that’s what you say, but how come it’s not in the draft?” he added.
The Con-com submitted its proposed draft Federal Constitution in July, with the document tagged as only “recommendatory,” since the mode of revising the Constitution —whether through Constituent Assembly or Constitutional Convention—has yet to be finalized.
Socioeconomic Planning Secretary Ernesto M. Pernia also pointed out that the cost of running a federal government may range from P120 billion to P131 billion, emphasizing that rushing to shift the system is not good for the country.