Diokno’s main concern: tax collection, not debt

Bangko Sentral ng Pilipinas Governor Benjamin Diokno expects to prioritize implementing existing tax measures over pushing new tax laws when he takes up his post as finance secretary, after answered the call to lead the economic team of new President Ferdinand Marcos Jr.

On Wednesday, Marcos Jr. also named Monetary Council member Felipe Medalla as Diokno’s replacement at BSP.

Medalla, who was economic planning secretary when Joseph Estrada was president, will serve as BSP governor, which will last until July 2023.

During a press briefing, Diokno stressed the importance of political continuity as he accepted his new position as finance secretary.

“As the country transitions to the next administration, I believe the continuity of sound macroeconomic and fiscal policies is important to achieving the stronger post-COVID Philippine economy that we all aim for,” he said. “As Finance Secretary, I will strive to continue to carefully and carefully balance the need to support economic growth, on the one hand, and maintain fiscal discipline, on the other,” he said. added.

Additionally, Diokno said he intended to retain “most of the undersecretaries” in the Department of Finance (DOF) as well as the national treasurer, Rosalia de Leon.

Fiscal consolidation

Asked if he would take up the fiscal consolidation plan handed over by the outgoing administration, he said it was too early for him to comment on whether or not to raise taxes, or grow new ones.

Still, Diokno said it was important to increase the economy’s growth momentum because strong growth would mean more revenue than the government could collect.

“We need a lot of money – first [in order] continue our [economic] growth momentum and second to service our higher level of public debt,” he said.

Even then, Diokno said the first item on the agenda when he takes over the finance portfolio will be public debt sustainability.

At 12.7 trillion pesos at the end of March 2022, the stock of national government debt represents just over 60% of gross domestic product (GDP) – the threshold not to be crossed based on international standards of prudent economic management. .

But Diokno said that’s no cause for concern as long as the Philippine economy is growing 6-7% “on a sustainable basis.” The government expects Philippine GDP to grow by 7-8% in 2022.

“That said, it is also important that I review debt sustainability to assure the domestic public and international credit watchers that we are serious about consolidating our fiscal resources so that we are able to reduce our debt. and our deficit-GDP ratio over time,” he added.

Pre-pandemic level

In the first quarter of this year, the government budget deficit was 6.4% of GDP. The goal is to bring this down to the pre-pandemic level of just 3%.

In a statement, the Bankers Association of the Philippines (BAP) welcomed the new appointments for Diokno and Medalla.

“Drs. Diokno and Medalla are outstanding economists who have the academic distinction and broad experience that transcends different jurisdictions, making them the best candidates for these roles,” said Antonio Moncupa Jr., President of BAP.

Moncupa said Diokno’s and Medalla’s experiences as economic managers in previous administrations were valuable assets as the Philippines moves toward economic and post-pandemic recovery.

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