BBM should adopt an austerity budget

Former Central Bank Governor Jose Cuisia Jr. argues that President Marcos should adopt a more austere budget to curb the country's rapidly increasing debt-to-GDP ratio, which now stands at nearly six percent. A higher debt level forces the nation to allocate more funds towards interest payments, straining the government's financial capabilities.

Although the Philippines' tax base has not kept pace with its growing debt, the government continues to struggle in raising sufficient revenue through taxes to fund essential social and economic initiatives. The economy has been hampered by geopolitical tensions in the Middle East, leading to higher energy prices that disproportionately affect non-oil producing countries like the Philippines.

Cuisia further contends that the proposed 2027 national budget, set to be around P7.2 trillion, is riddled with political favoritism and pork barrel projects. For instance, he cites the allocation of P4.38 billion to the Ilocos Norte 1st district engineering office, which benefits President Marcos' son, House Majority Leader Sandro Marcos. Cuisia believes that these lavish allocations are squandering public funds on political patronage rather than productive endeavors, such as infrastructure, health, and education.

The former central banker warns that the mounting debt burden is eroding the government's financial flexibility, leaving a mere one-third of the budget available for critical spending. Consequently, this shortfall is driving foreign investors away, causing a decline in foreign direct investments and negatively impacting the foreign exchange rate.

Cuisia emphasizes that attracting foreign capital is crucial for the country's economic recovery and stability, suggesting that the current fiscal mismanagement could deter potential investors.

He also highlights that the Middle East conflict has resulted in a decrease in remittances, further depleting foreign exchange reserves. As a result, the Philippine central bank confronts a challenging dilemma: managing the depreciating peso without resorting to market interventions, which could exacerbate the situation. Cuisia concludes that the Senate has the power to block the proposed budget, but he remains skeptical that President Marcos will veto the plan, fearing that it will perpetuate wasteful spending and weaken investor confidence.