Alternative fumes to running on empty

The latest twist in our pandemic drama is the President’s admission that MECQ over Metro Manila, Bulacan, Rizal, Cavite, and Laguna would be difficult to extend, “due to lack of funds to help those whose movements are limited by the lockdown.”

Wala ng pera. (There’s no more money.)

By now it is clear that the lockdown was absolutely necessary in the Philippines. Our healthcare facilities needed the reprieve. The weakness of our public health system cannot be blamed on the Duterte Administration alone. Previous governments were also remiss.

Vietnam, which fought many colonial wars and became independent only 45 years ago, is many years ahead of us. Health has been their focus all these years.

We, however, were caught flat-footed by a virus we dismissed in half jest. We prioritized diplomacy and friendship, sacrificing people’s lives and livelihood. We failed to think through testing, contact tracing, quarantine, and treatment. Execution is dismal. Communication is a tragedy.

Should the President extend the MECQ, as the virus refuses to stand down, money will have to be raised to support the impoverished masa (masses); to provide wage support for the disemployed, and even to keep small business alive.

The problem is we are running out of funds. The President has indicated, we are running on empty.

This is discouraging since it was only recently that bigger quarantine facilities were set up to contain infection. While the 525-bed facility in Parañaque was funded by the Razon group, Meralco and Maynilad, public funds are still needed to man the facility with frontliners, medical supplies and equipment.

Funds are likewise needed for big facilities being established to service Metro Manila, Bulacan, and CALABARZON with a total capacity of 3,000 beds. The Department of Public Works and Highways (DPWH) has also just completed 300 quarantine facilities all over the country plus 95 more with a total bed capacity of 13,000.

It is also only recently that the government has found its bearing on contact tracing. Some local government units are trying their luck in the grassroots. On the national level, however, the Technical Education and Skills Development Authority (TESDA) will launch its training program for contact tracing not this month, but in September. Done with the Department of Health (DoH) and health industry experts, these training sessions will blend on and off-line modules for at least 15 days. Funds will again be very badly needed to expand TESDA’s reach and ensure that tracers do not rely on hearsay and police shakedowns.

What these late developments are telling us is that we are just beginning to fight back in a fight that is now into its seventh month. It is also certain to be very long. Perhaps 15 rather than the usual 12 rounds.

Senator Manny Pacquiao should be the first one to protest. It is as if we asked for a timeout in the middle of boxing, to do shadow boxing, train with weights, and exercise for stamina. In the meantime, the Department of Labor and Employment (DoLE) reports that in the first nine days of August alone, about a thousand business firms have laid off workers. Some 944 establishments have downsized or completely folded-up, letting go of more than 16,130 workers.

DoLE also reports that beginning this year, 157,705 workers from 7,759 business firms have lost their jobs. Official statistics indicate an April 2020 unemployment rate of nearly 18% or 7.3 million unemployed. Sadly, this figure will not slim down. By mid-September, the broadsheets reported that 100 LRT-1 personnel will be laid off. Poverty incidence is bound to climb.  Certainly, the President would need more funding to support our other wise productive workers.

With billions of funds missing from the public health insurance agency, how does one explain to starving workers and their families that they cannot be given cash transfers of a few thousand pesos?

With this pandemic promising to persist and be long drawn out, we will need to spend more, first on health, and second, for keeping business and jobs for our people. For instance, we need to spend more to bring home our affected overseas workers and find alternative jobs for them. This is a tall order.

It is good that banks are lending more to small businesses as alternative compliance with RRR. However, it would be a win-win if without being mandated to do so, banks could allow accommodative monetary policy to filter down to their borrowers in terms of lower lending rates. It is true that with higher loan loss provisioning, banks are now also challenged in their profitability. But, fortunately banks are not showing negative net income.

What is at stake here is household and business survival.

It is good to remind ourselves that this is a whole-of-nation problem. It thus requires a whole-of-nation solution. As Scripture reminds us, we have to carry each other’s burden. This is how to fulfill the law of Christ.

In the beginning of the year, we faced the pandemic from a position of strength. We had 21 years of sustained economic growth supported by game-changing policy and structural reforms. Even after the Asian Financial Crisis and the Global Financial Crises, our economy remained robust.

But because of the pandemic, our risk buffers are now being eroded.

We have to spend more. But since new or higher taxes cannot be imposed during a pandemic, higher spending means greater borrowing.

Fitch was the first to comment on a possible diminishing fiscal space. It raised the issue of the general government GDP to debt ratio of 34% rising to around 48% this year. This trajectory is worrisome even as the level is expected to still fall left of the peer median of nearly 52%.

Fitch admitted that fiscal space remains to accommodate more deterioration in public finance. Nonetheless it downgraded its original forecast of -4% growth for 2020. Fitch is worried about the Philippines’ “difficulty in containing the virus,” which could dissipate its so-called risk buffers. As a result, Fitch kept the country’s investment grade credit rating at triple B. But it also revised its positive outlook to stable, noting that risks are on the upside.

Earlier, Moody’s also put great emphasis on debt metrics as potential reasons for a downgrade. Moody’s expects the general government debt to GDP at a slightly lower ratio of 45%.

As we suggested in the past, we could minimize borrowings while keeping public spending in broad terms through as much realignment as we can squeeze from the budget. Our economic managers should demonstrate to the President and Congress the need to temper spending “whatever it takes” with fiscal responsibility. NEDA Secretary Karl Chua suggests that we must learn how to dance with the virus. Strict quarantines may have to be reimposed from time to time depending on the upsurge of the coronavirus. Finance Secretary Sonny Dominguez calls for “behavior patterns and appropriate technology that will allow us to operate effectively and efficiently and safely.”

Otherwise, we must find a truly creative and collective way to run on fumes as our gas tank precariously empties.

 

Diwa C. Guinigundo is the former Deputy Governor for the Monetary and Economics Sector, the Bangko Sentral ng Pilipinas (BSP). He served the BSP for 41 years. In 2001-2003, he was Alternate Executive Director at the International Monetary Fund in Washington, DC. He is the senior pastor of the Fullness of Christ International Ministries in Mandaluyong.