On Fiscal Crisis
I posted this comment on the NEDA N! News Freedom Wall (week of September 22, 2002), in response to the following question:
Recently, President Gloria Macapagal-Arroyo admitted, “We are already in the midst of a fiscal crisis and we have to face it squarely--wielding our courage, resourcefulness, and solidarity as a nation and people.” Fiscal crisis, as defined by international financial institutions, such as credit-rating and multilateral agencies, is being in a state of default, and having a deficit that can no longer be financed due to limited access to the capital markets. Amid talk of a fiscal crisis, NEDAns gave their two-cents worth of views on what should be done.
It may also be good to refer to a white paper by a group of UP School of Economics professors, entitled The deepening crisis: the real score on deficits and the public debt (clik here to download a PDF copy), for more information (I suggest you brew some strong coffee, or prepare a large glass of iced tea; this may be a long reading).
Government can not simply cut back on implementing its activities in the aim of averting the looming fiscal crisis. It is not economically sound to altogether scrimp on expenditures without considering the impact on various stakeholders, especially if this means a slowing down of economic growth. Hence, fiscal deficit is not necessarily bad, as long as it is kept at optimal levels. However, I believe that we are at a point where our deficit has grown out of hand, with government’s being inefficient.
I say we bring down our expenditures to a reasonable level by ensuring that government only spends for activities that are responsive to the targets/goals, and are efficient enough to provide the most benefit at the least possible cost. This may entail scrapping of non-responsive ongoing programs and projects, rationalization of the bureaucracy (all branches of government should be included--and yes, I do believe CSC will soon implement its program for this, but the coverage is only the executive branch), lessening or removing altogether the discretionary spending (as would be best exemplified by pork barrel allocations), and privatization or devolution to LGUs of national government’s non-core/non-essential activities (i.e. most GOCCs, and other activities best handled by local governments).
We should look for sustainable means to finance our deficit. On the revenue side, tax collection should be improved (perhaps not yet “increased,” but rather improved--yeah, run after the large-scale tax evaders), so we can lessen our dependence on debt. Perhaps we should consider structuring and restructuring our debt such that current servicing would be limited to manageable levels, and that new debt would be concessional enough not to be too heavy on our pockets and that of the future generations.
On austerity measures: honestly, as a civil servant, I feel the brunt of the administration’s and its respective agencies’ implementation of measures to save up. While the austerity measures in place are mostly rational and reasonable, one could not help but feel his/her psychic income declining, especially considering that the administration is scrimping on its honest civil servants (i.e. proposing to turn off the air conditioning at 5 p.m. when work in our Staff is at peak during this time), when it does not seem to be undertaking any concrete measures to effectively curb large-scale corruption, purge itself of non-essential expenditures (i.e. losing/useless GOCCs), and control the discretionary pocketing, err, spending of many legislators of their pork.
In the end, what we need is political will. We need leaders who are willing to lead by example by making sacrifices (yes, even political sacrifices) and doing the necessary steps to enhance the peoples’ welfare in the long run. We need leaders who can curb thoughtless spending, scrap/give up pork barrel, run after tax evaders, incur only reasonable debt, and whatever else needs to be done. We need leaders who are statesmen (or is “statespersons” a more P.C. term). Then we can expect the people to follow.
Recently, President Gloria Macapagal-Arroyo admitted, “We are already in the midst of a fiscal crisis and we have to face it squarely--wielding our courage, resourcefulness, and solidarity as a nation and people.” Fiscal crisis, as defined by international financial institutions, such as credit-rating and multilateral agencies, is being in a state of default, and having a deficit that can no longer be financed due to limited access to the capital markets. Amid talk of a fiscal crisis, NEDAns gave their two-cents worth of views on what should be done.
It may also be good to refer to a white paper by a group of UP School of Economics professors, entitled The deepening crisis: the real score on deficits and the public debt (clik here to download a PDF copy), for more information (I suggest you brew some strong coffee, or prepare a large glass of iced tea; this may be a long reading).
Government can not simply cut back on implementing its activities in the aim of averting the looming fiscal crisis. It is not economically sound to altogether scrimp on expenditures without considering the impact on various stakeholders, especially if this means a slowing down of economic growth. Hence, fiscal deficit is not necessarily bad, as long as it is kept at optimal levels. However, I believe that we are at a point where our deficit has grown out of hand, with government’s being inefficient.
I say we bring down our expenditures to a reasonable level by ensuring that government only spends for activities that are responsive to the targets/goals, and are efficient enough to provide the most benefit at the least possible cost. This may entail scrapping of non-responsive ongoing programs and projects, rationalization of the bureaucracy (all branches of government should be included--and yes, I do believe CSC will soon implement its program for this, but the coverage is only the executive branch), lessening or removing altogether the discretionary spending (as would be best exemplified by pork barrel allocations), and privatization or devolution to LGUs of national government’s non-core/non-essential activities (i.e. most GOCCs, and other activities best handled by local governments).
We should look for sustainable means to finance our deficit. On the revenue side, tax collection should be improved (perhaps not yet “increased,” but rather improved--yeah, run after the large-scale tax evaders), so we can lessen our dependence on debt. Perhaps we should consider structuring and restructuring our debt such that current servicing would be limited to manageable levels, and that new debt would be concessional enough not to be too heavy on our pockets and that of the future generations.
On austerity measures: honestly, as a civil servant, I feel the brunt of the administration’s and its respective agencies’ implementation of measures to save up. While the austerity measures in place are mostly rational and reasonable, one could not help but feel his/her psychic income declining, especially considering that the administration is scrimping on its honest civil servants (i.e. proposing to turn off the air conditioning at 5 p.m. when work in our Staff is at peak during this time), when it does not seem to be undertaking any concrete measures to effectively curb large-scale corruption, purge itself of non-essential expenditures (i.e. losing/useless GOCCs), and control the discretionary pocketing, err, spending of many legislators of their pork.
In the end, what we need is political will. We need leaders who are willing to lead by example by making sacrifices (yes, even political sacrifices) and doing the necessary steps to enhance the peoples’ welfare in the long run. We need leaders who can curb thoughtless spending, scrap/give up pork barrel, run after tax evaders, incur only reasonable debt, and whatever else needs to be done. We need leaders who are statesmen (or is “statespersons” a more P.C. term). Then we can expect the people to follow.
This entry was posted
on Wednesday, September 22, 2004 at 16:28.
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I totally agree that the bottom line is political will. One of these days, I will write about this as well. Very briefly, here's the situation as I see it. How can GMA expect to stir up the Filipino's patriotic instincts if the government has not exhausted all other means to solve this so-called crisis? For example, this stupid Bayanihan Fund idea, I believe, will only work if assuming government corruption and inefficiency has been addressed, funds are still lacking. Why in the world would I give one centavo if rich smugglers get away with murder?
Rabbit on Friday, September 24, 2004 9:45:00 PM
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Sadly, the N-News editorial group was unable to post this particular comment in the N-News Freedom wall, perhaps due to time constraints, or because most of NEDA was busy in the Medium-Term Philippine Development Plan (MTPDP) formulation. So I therefore concluded that the "feedback/comments" portion of the N-News was not quite dynamic. Anyway, they promised to include me in their mailing list for seeking comments on issues (prior to publication) in the future.
Unknown on Wednesday, October 06, 2004 10:06:00 AM
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Then two months later, she says we're out of the crisis already. Why? Saving at the office and the like did it? That's ... 'surreal'. Did she say something what took place that made us jump out of the rut.
angelo on Saturday, November 13, 2004 5:10:00 AM
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