Domestic borrowing: A key to economic survival and growth

The country's government debt is going to hit P19.77 trillion by the end of 2026—from only P6 trillion in 2016, averaging an annual deficit of P1.4 trillion. The government's shift to borrow more from domestic sources, gradually removing the dependence on expensive dollar-denominated loans, is the safety valve against the downside in international credit ratings should any loan default occur on foreign debt. HERITAGE BONDS. Shorn of the foreign exchange costs on foreign borrowing, tax-free, locally issued 10 percent treasury coupon bonds, call them heritage bonds, should be considered by the BSP to capture individual employees' retirement funds, private or public, with, say, a P100,000 to P1 million cap per retiree; the retirees need sustainable sources of income, to augment their meager retirement pay for the costly health maintenance medicines and supplements, while government-subsidized benefits in PhilHealth could be resorted to only for serious illnesses and hospitalizations. The 2 to 4 percent extra interest paid on such heritage bonds over commercial rates is well worth the cost to the government because of their multiplier effect, as they would end up increasing domestic consumption. INCREASING NATIONAL EXPENDITURE PROGRAM (NEP). The growing population of 1 percent, or 1 million, pressures the government for proportionate budgets for food, health, and social services. The NEP, proposed to grow from P6.79 trillion in 2026 to P7.21 trillion in 2027—or 6 percent—raises concern versus the 3.2 percent estimated gross domestic product (GDP) growth projected by international analysts. The gap is even wider, considering that the GDP of the base year 2026 of P30.2 trillion could generate government revenues, by historical experience, of less than 16 percent, or only P5 trillion, at best. OUT-OF-THE-BOX SOLUTIONS. The need to pump government spending and speed it up is vital for an economy dependent on micro, small, and medium-scale enterprises (MSMEs), comprising 99.63 percent of total business firms operating, mostly in the domestic market. Our exports of around $85 billion are not enough to cover roughly $135 billion in import requirements. Other than creating a new export department, there's nothing much to hope for with our exports because the DA, the DTI, the DepDev, and the Dole are locked in by domestic problems, and there is no significant push on export potential for the produce of our vast land and mineral resources, like working to displace the 5 million metric tons of rice imports that we could be producing ourselves, or the piggery farms and the local fishing industry. We now import tons of the erstwhile locally produced fish, galunggong. The government will have to think of out-of-the-box solutions to generate productivity in the domestic economy; one is by empowering workers' productivity with promised rewards on increased revenue output—instead of pushing for increases in the minimum wages by legislation. We can have more jobs for the additional 800,000—1 million joining the workforce annually, if the MSMEs are made productive first, with the empowerment of gain-sharing with their workers, instead of imposing the minimum wage hikes. MARVEL K. TAN, CPA, captbeloytan@gmail.com