MANILA, Philippines – The outgoing economic directors of the Duterte administration advised the new BBM financial group to work on financial consolidation, the premise being that they left an economy with adequate measures and policies to support and implement development plans, such as Amendments to the Trade Act (FTA), RA 11647, enacted on March 4, 2022, opening the country to more Foreign Direct Investment (FDI), etc., as well as credit ratings up to passable from most of our international lenders. These are, of course, their subjective assessments of the financial situation they left us with, with which some might disagree.
Financial consolidation could mean efforts to consolidate government assets and liabilities, restructure and possibly secure better repayment terms. In short, it looks like a balance sheet audit done for private companies in receivership. How it can be possible to bring together the financial structure of government agencies under one financial roof is a big challenge. Beyond this review of the balance sheet, revenue generation will also be captured to ensure debt restructuring is feasible against future revenue generations. More public debt will have to be avoided like the plague, unless it is unavoidable.
Generally, the country has to live here within its means. Contingency of unexpected upheavals, like the recent COVID health emergency that caught us off guard, should be anticipated with earmarked funds set aside in the grand financial model. Just like developing a well-thought-out family budget.
Congress, as part of the consolidation process, should control with legislation, put caps on consequent government borrowing whenever annual budgets are considered. The executive department’s discretionary power over borrowing should be confined within set legal limits, for checks and balances. We have seen how public debt has tripled under the Duterte administration, from 6 trillion pesos in 2016 to nearly 13 trillion pesos, with weak revenue generation on the horizon.
This consolidation is expected to occur within the next six years of the BBM administration. However, a very critical element of financial consolidation that cannot be omitted is the country’s population growth of 1.32% per year (1.3 million more people!) which cannot continue as it will derail any planning and sensible financial consolidation. We have enough manpower to handle the development of the industry; we simply cannot risk the financial situation spiraling out of control, if the mouths to feed continue to increase significantly.
The Population Commission (POPCOM) is a key partner in advancing the drastic planning of population control and growth for the next six years as part of fiscal consolidation. Legislation should be underway to discourage overcrowding, for example by offering incentives to have smaller families. China has considerably reduced its population growth in one year in 2020 from 1.11% to only 0.34% in 2021. If there is a will, there is a way! – Marvel K. Tan, [email protected]