GOVERNMENT fiscal consolidation efforts aimed at reducing the country's debts should be supported by efforts to raise revenues, an International Monetary Fund (IMF) official said.
"Fiscal consolidation is expected to continue in 2024 with the proposed budget for 2024 in line with the medium-term fiscal framework," IMF Resident Representative for the Philippines Ragnar Gudmundsson said during a Manila Times forum on Wednesday.
IMF Resident Representative for the Philippines Ragnar Gudmundsson"The important outcome is that this should support the government's objective to reduce the debt-to-GDP (gross domestic product) ratio to less than 60 percent of GDP by 2025," he added.
This, however, "could still be complemented by additional revenue mobilization efforts."
The debt-to-GDP ratio, which ballooned after the government borrowed heavily to address the impact of the Covid-19 pandemic, fell to 60.2 percent in 2023 from 60.9 percent a year earlier.
It was also better than the 61.2 percent targeted under the Medium-Term Fiscal Framework.
Gudmundsson said a constant gradual reduction was possible and that this year's fiscal consolidation would primarily come from spending restraints and higher tax revenues.
He noted that value-added tax (VAT) collections were particularly weak at only about a third of the potential tax base, so "consideration should be given to broadening the VAT and corporate income tax bases, essentially, not necessarily by increasing rates, but rather by rationalizing exemptions and tax relief measures and avoiding tax holidays."
"These reforms should be complemented by ongoing efforts to improve tax administration, including through digital tax filing and electronic payments and sustained efforts to enhance tax compliance," he added.
Implementing expenditure controls should help the government reach its deficit targets, Gudmundsson continued.
He urged reforms to the military and uniformed personnel pension system by making contributions mandatory and pointed to proposed laws such as the Budget Modernization bill, National Government Rightsizing program, and a new Government Procurement Act.
"All these should help improve fiscal transparency and efficiency," he said.
Practical transition plans within the framework of fiscal decentralization should also be a focus, which will require intensified capacity building in terms of budgeting, execution and reporting at the local level.
This is crucial for sustaining vital public services and improving accountability at the local level, Gudmundsson said.
He also emphasized the importance of enhancing oversight for government-owned and -controlled corporations, public-private partnerships (PPPs), and social security institutions to mitigate fiscal risks.
"[T]his is more important as the government is ramping up its efforts to promote PPPs, all for good reasons," Gudmundsson said.
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