[ANALYSIS] A deeper look into Duterte’s finances to fight the coronavirus

As the scourge of COVID-19 rages on, our government finds itself cash-strapped. President Rodrigo Duterte himself said so.

On March 30 he confidently declared – in one of his late night TV addresses – that he has the money to fight COVID-19. “Huwag na huwag kayo matakot kasi sabi ko may pera ako.” (There's no need to fear; I'm telling you, I have the money.)

But in a shocking reversal, on April 6 – in yet another late night address – Duterte confessed to the nation, “There’s not enough money to go around.” He ordered Finance Secretary Carlos Dominguez III to immediately generate more funds: “Steal or borrow, I don’t care. Produce the money,” Duterte said in Filipino.

Nearly 4 years into his term – and right in the middle of the country’s worst public health and economic crises in years – Duterte seems to be appreciating the intricacies of public finance just now.

In this piece we take a deep dive into the Duterte government’s finances to fight COVID-19, and make sense of the conflicting statements and limited information surrounding it. (READ: What we know so far: Funding the fight vs the coronavirus)

1) Just because you have a budget doesn’t mean you have the money.

For starters, having a budget doesn’t necessarily mean you already have money or cash.

Think of your own household. Mom or dad may have planned a detailed budget for the family’s expenses next month (totaling, say, P40,000). But it’s a wholly different issue where that P40,000 will come from – the pooled wages and salaries of all working family members, savings, loans, remittances, etc.

The same goes for the Duterte government.

The Bayanihan to Heal as One Act gave Duterte the legal authority to recast the existing 2019 and 2020 General Appropriations Acts, generate savings therefrom, and spend the resulting funds to fight COVID-19.

Duterte effectively has two budgets to work with (recall the 2019 budget was extended till end of 2020). But this doesn’t necessarily mean he has money at hand. Cold cash could come from, say, taxes, loans, grants, or dividends from government-owned and controlled corporations (GOCCs).

The initial figure floating around, P275 billion, was merely a rough estimate of possible funds which lawmakers said Duterte can generate from the Bayanihan Law – not how much Duterte plans to spend in total against COVID-19. But you won’t find any reference to P275 billion in the Bayanihan Law. Neither is it a lump sum fund you can find in the 2019 or 2020 budget.

Whatever the total funding requirement for COVID-19, the budget should not be a problem. There’s more than enough room in both budgets to reprioritize projects and programs in favor of more urgent needs during this crisis.

The more immediate question to ask is: do we have enough cash in the Treasury for Duterte to implement his desired COVID-19 interventions?

2) The Duterte government faces a cash crunch.

Even supposing Duterte already has a well-crafted spending plan, he faces a bigger problem: the cash position of the government seems to be getting tighter.

Last year the government spent well beyond its means: its budget deficit (or revenue shortfall) skyrocketed to 6.8% of GDP in the last quarter of 2019. That’s the highest since at least 1998. This bumped up the full-year deficit to 3.6%, higher than the government’s original 3.2% target.

For the first two months of 2020, the Treasury recorded a deficit of P14.6 billion. Available cash was around P420 billion, mostly from domestic borrowing.

If you think that’s big, remember that government is not shutting down and still has lots of things to pay for.

For instance, this year government will use part of this cash supply to pay P755 billion of interest and principal payments on our outstanding debt. For our external debts, the government needs to pay an extra $5.2 billion. The salaries of all 2.4 million government workers in the next 3 months will also cost roughly P300 billion.

At the same time, tax revenues are expected to dry up.

In early March, Secretary Dominguez admitted COVID-19 will likely slash the government’s tax revenues by P91 billion, owing to slower imports and sales of domestic businesses. With both income tax payments and the Luzon-wide enhanced community quarantine extended, expect tax revenues to dwindle further.

Government’s difficulty in accessing cash is also betrayed by the following:

First, Secretary Dominguez is fast-tracking loans worth $1 billion to $2 billion from multilateral agencies like the World Bank, Asian Development Bank, and Asian Infrastructure Investment Bank.

Second, the Bangko Sentral ng Pilipinas (BSP) already lent a helping hand to the Treasury by buying government securities worth P300 billion. This “repurchase agreement” is a huge cash injection into our government’s coffers. But with the huge funding requirements for COVID-19, subsequent rounds of repurchase agreements may be necessary.

Third, the government is scouring for dividends from some of its agencies and GOCCs.

Fourth, the Treasury could raise billions of pesos from auctioning off government securities in the next few months. But previous auctions have failed because jittery investors demanded interest rates that government deemed too high.

All in all, everything points to a government scrambling for cash.

3) Duterte still has no proper budget and budget breakdown.

Finally, Duterte still has no comprehensive, detailed spending plan.

More than 3 weeks since the initial lockdown on March 15 – and nearly two weeks since the Bayanihan Law took effect – we still don’t know exactly how much Duterte plans to spend in our fight against COVID-19.

If you look at Duterte’s first weekly report to Congress (which he needed to submit according to the Bayanihan Law), there are tables that seem to show some sort of budget breakdown – but they’re not.

Table 1 shows that 3 agencies of the national government – DSWD, DOH, and DOLE – have available appropriations (budgets) they can use before they ask for more. Meanwhile, Table 2 shows that, once the need arises, P210 billion worth of appropriations can be repurposed for the COVID-19 effort.

Table 1. Report to the Joint Congressional Oversight Committee (March 30, 2020).

Table 2. Report to the Joint Congressional Oversight Committee (March 30, 2020).

To be fair, putting together a sound COVID-19 budget is a tall order. The COVID-19 crisis is evolving fast and government can’t commit to a single total cost estimate and breakdown.

But it behooves our officials to provide ballpark figures at the very least. Economists from the University of the Philippines estimate the government might need up to P300 billion to “protect our people, avert a recession, and arrest the misery that COVID-19 will bring.”

By now Duterte should also identify which programs and projects he plans to discontinue to generate funds for much-needed medical equipment and economic aid. Things that could be profitably put on the chopping block include exorbitant confidential and intelligence funds as well as inessential and poorly designed infrastructure projects.

At any rate, absent a proper budget and budget breakdown from Duterte, the Filipino people won’t have a proper handle on the scale, scope, and financial impact of the government’s response.

Demand for transparency, accountability

Here are 3 things we should ask the Duterte government in the coming weeks and months:

First, where does Duterte plan to get the money to spend for their COVID-19 interventions and relief efforts?

Second, how much does Duterte plan to spend for his entire COVID-19 response? And what exactly is the budget breakdown?

Third, exactly which line items in the budget – programs, activities, and projects – will Duterte abandon and realign to help finance the COVID-19 efforts?

We’re in for tough times, and the Duterte government – no matter how cash-strapped – must act quickly to pour resources into our public health system and give economic aid to everyone, especially the poor.

But the urgency to make decisions in this crisis is no excuse for the government to let go of transparency and accountability. In fact, with the colossal sums of money government will have to spend, these two are more important than ever. – Rappler.com

The authors are former government workers.

JC Punongbayan

JC Punongbayan is a PhD candidate and teaching fellow at the UP School of Economics. His views are independent of the views of his affiliations.