Economic team meets on federalism

Amid concerns that the fiscal provisions of the draft federal constitution were unclear, the economic team of the Duterte government will meet this week to arrive at uniform assumptions about the costs of switching to a federal form of government.

Undersecretary Rosemarie G. Edillon of the National Economic and Development Authority (Neda) told reporters that the meeting on 29 August would be attended by the economic managers.

Cost of federalism

While the Neda had its own report with assumptions about the costs of federalism, Edillon said that "we postpone the DBM (Department of Budget and Management) as the ultimate authority on the numbers."

"What we can do is inform [the DBM] what were our assumptions, & # 39; these are the figures & # 39 ;, "said Edillon.

Edillon added that the estimates of the Neda & # 39; conservative & # 39; goods.

Neda Chief and Socioeconomic Planning Secretary Ernesto M. Pernia said earlier that switching to a federal form of government would incur additional costs of up to P130 billion per year, and could therefore disrupt the country's economic growth momentum.

For the part of the Ministry of Finance (DOF), its chief economist and junior secretary Gil S. Beltran estimated earlier that, if implemented next year, the fiscal provisions of the draft federal charter could increase the budget deficit to a record of P. 200 billion, such as that the national government should cut jobs, as well as infrastructure expenditures.

Beltran had warned that the expected budget deficit equal to 6.7 percent of gross domestic product (GDP) would be the largest ever.

Based on Beltran's calculations, the fiscal provisions of the federal federal constitution would allocate P744.9 billion to the federal region, on top of P251.1 billion in capital transfers.

Another P131 billion would be allocated to the equalization fund, Beltran added.

According to the draft charter, the equalization fund, which may not be less than 3% of the annual national budget, would be allocated for each sub-region on the basis of its needs.

Larger amounts are allocated to regions that need more support to become economically and financially sustainable, as judged by the federal intergovernmental commission.

Taxes transferred to the federal region will also cost P168 billion, while the block subsidies for the autonomous region of Bangsamoro and Cordillera would each amount to approximately P100 billion.

As a result of these additional expenses, Beltran said that the federal government would be forced to reduce national spending, equivalent to P560 billion, or an amount that currently funds 95 percent of government staff services to maintain the medium-term budget deficit quota 3 per cent of GDP.

& # 39; Not viable & # 39;

For 2019, the budget deficit program was P624.4 billion, equivalent to 3.2 percent of GDP, because the government wanted to speed up the ambitious infrastructure program "Build, Build, Build".

But Beltran said that a budget deficit of 6.7 percent & # 39; not feasible & # 39; used to be.

The Minister of Finance, Carlos G. Dominguez III, for his part, said that cutting the expenditure program to maintain the budget ceiling would force the national government to divest "95% of its employees or the funds for the program" Build, Build, Build "by 70 percent, or a combination of both."

& # 39; Very confusing & # 39;

The head of Duterte's economic team, Dominguez, had also informed the senate that the fiscal provisions in the draft federal charter were "very confusing".

Dominguez had warned that the country's investment-grade credit ratings, making it cheaper to borrow money, could "go to hell" and that interest rates might slip because the draft constitution was "unclear" as spending to pay the public debt , military and diplomats and additional capital to the central bank would come before or after the proposed 50-50 division of the regions & # 39; s and the national government of the total income collections.

Members of the advisory committee claimed that the split of revenues would take place after the aforementioned expenses, but Dominguez had said: "When I read the concept, it does not state that."

Given the different figures and assumptions, Budget Secretary Benjamin E. Diokno had been searching for a more in-depth and uniform study by the economic team about the planned change in the form of the government.

During the Meet Inquirer Multimedia forum this month Diokno said that the DBM, the DOF and the Neda should reach agreement on the assumptions.

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