By Aesha Sarrol and Gabriel Dolot
Worried of unstable income, Emerson Arado, a minibus driver in Manila laments, “We can’t afford that. I have rent to pay and a family to feed,” when asked about the implementation of new social distancing protocols that halts public transportation and would affect his income. Meanwhile, Victor Espina, a local government office driver, struggles to make ends meet, forcing him to do informal jobs by doing groceries for other people. These people have one thing in common— vulnerability.
Under the longest lockdown period of the Philippines, job security remains uncertain causing distress among civilians. The initial underestimation of the president claiming that “everything is well” has greatly affected society’s mindset about the health crisis causing them to take the situation lightly and to disregard the virus’ grave effects.
Debt dependence has been the primary fiscal response of the government to augment its capability in addressing the economic and health dilemmas brought by COVID-19. Outstanding Foreign Debt has been agonizing Filipinos for years and will continue to torment the generations to come, as the ongoing health crisis exacerbated restrictions on economic activity.
Since the start of the pandemic, the government has been constantly tapping financial giants for loans to help ease the economic burden and to support their initiatives against COVID-19. Last March 13, 2020, the Asian Development Bank (ADB) approved a grant worth $3 million for the purchase of emergency medical supplies and to be able to set up new laboratories to increase testing capacity by 3,000 tests per day. In less than a week, ADB approved another $5 million grant to the Philippines that specifically aimed to deliver nutritious food baskets for almost 140,000 households in Metro Manila and its neighboring cities.
Bearing the same intention of decreasing COVID-19’s harmful effects, on April 15, 2020, the Third Risk Management Development Policy Loan, a $500 million grant to the Philippines, was signed by Department of Finance (DOF) Secretary Carlos Dominguez III and Achim Fock, World Bank acting country director for Brunei, Malaysia, Philippines, and Thailand. This loan focuses on the implementation of disaster rehabilitation frameworks, development of investment plans for seismic risk reduction, and retrofitting of important government buildings as well as emergency cash transfer programs. It will be paid by the Philippine government in 29 years but there were no details regarding its interest rate. It was also scheduled for disbursement last April 30.
The World Bank also approved an additional $100 million loan for the Philippines as part of the COVID-19 emergency response project. It was implemented by the Department of Health (DOH) to bolster the country’s capacity to respond to the health crisis. The said loan will be used for Personal Protective Equipment (PPEs) such as essential medicines and supplies, laboratory equipment and test kits and to support logistics responsible for delivering these supplies and equipment without delay. It is also for the expansion of the country’s laboratory capacity against emerging infectious diseases.
ADB also provided another loan worth $1.5 billion to help the government in mitigating COVID-19’s socio-economic repercussions. The institution shared that the loan is the largest budget support loan to the Philippines and that it was part of their COVID-19 Active Response and Expenditure Support (CARES) program. On April 27, ADB signed another $200 million supplementary loan to help vulnerable households to evade poverty. President Rodrigo Duterte signed the “Bayanihan to Heal as One Act” or RA 11469 which includes the Pantawid Pamilyang Pilipino Program (4Ps) that provides cash relief of Php 5,000-8,000 per month for two months to low-income families.
On two consecutive days, the World Bank and Beijing-based Asian Infrastructure Investment Bank (AIIB) signed a separate $500 million and $750 million loan to the Philippines. According to AIIB, loan terms mandate that subsidies to the 18 million families must be provided by July; the government must also dispense wage subsidies and tax relief worth $600 million to at least a million employees by December.
With all these figures combined, loans and grants received by the Philippines hit $6.508 billion or over Php 325 billion. It is also expected that the national government’s debt will reach Php 9.589 trillion by the end of the year equal to 49.8% of the country’s gross domestic product (GDP).
Due to the negative economic implications of the pandemic, the national government established a four-pillar socio-economic strategy wherein the majority of the budget is allocated based on these pillars. The first pillar focuses on support for vulnerable groups and individuals, the second pillar is concerned with the purchase of medical supplies and testing kits, the third pillar is for the financing of the COVID-19 pandemic response, while the last pillar comprises the economic recovery program.
The support for vulnerable groups and individuals is packaged through different programs. One of these programs targets social protection for those who have been severely affected by the Enhanced Community Quarantine (ECQ). Dubbed as the government’s Social Amelioration Program (SAP), a Php 205 billion subsidy covers 18 million low-income families belonging to the informal sector. An additional 5 million families were included as beneficiaries as of May 4, 2020. The first tranche of aid was distributed last April which had an initial deadline set on April 30 but was later changed to May 15. 4.2 million Filipinos were left out after the first tranche of cash aid.
Those who were left out would be prioritized in the second tranche according to the Department of Interior and Local Government (DILG). As of June 19, 1.3 million families have received aid from the second tranche; however, communities under General Community Quarantine (GCQ) will no longer receive cash assistance from the SAP. DSWD incumbent secretary Rolando Bautista said that communities under GCQ will no longer receive cash aid due to limited SAP resources which were recommended by the National Economic and Development Authority (NEDA).
The president guaranteed social relief for the marginalized through these loans and that it would be distributed among local government units (LGUs) for faster reach. However, weeks into quarantine, promised help lost its way to the needy. Sara Celiz, last April 2 said, “Ang apo ko, toyo at mantika at kanin ang kinakain. Tiis-tiis lang talaga hanggang matapos ito.” Sarah’s husband, Alan, was the sole earner for the family by painting houses in Silang, Cavite. Unfortunately, Alan lost his job due to the quarantine causing them to cling to the president’s promise and to rely on the government’s amelioration programs. With 15 mouths to feed, they received aid on March 30 consisting of one kilo of rice and a can of sardines. She shared that while others are given goods, some are left to starve.
The administration’s responsibility to provide for the citizens turns into a debt of gratitude for the destitute.
Aside from families, laborers from small businesses were covered under the Small Business Wage Subsidy Program which allocated a budget of Php 35 billion; 3.4 million workers will be supported by the Php 51 billion subsidy program according to the Department of Finance (DOF). Overseas Filipino workers (OFWs) are also beneficiaries with Php 1.5 billion allocated for them, under a cash aid program. The national government also transferred Php 30 billion to local government units (LGUs) for easier disbursement to vulnerable constituents. Through the Department of Labor and Employment (DOLE), cash assistance, amounting to Php 2 billion, was divided among workers. Social Security System (SSS) members, approximately 60,000 of them who have been laid off due to the shutdown of businesses, shall receive unemployment benefits from the allocated Php 1.2 billion.
Subsidies are to be distributed yet news reports like that of Michelle Silvertino dying at a footbridge after being stranded for days without relief, shocked the public. Silvertino walked from Quezon City to Pasay in the hopes of catching a provincial bus. The cash aid that she should have received was behind schedule as her family only received it a few days after her death. The workforce suffers because businesses have already resumed yet there is a lack of effective transportation policies amid the quarantine; the government neglects the welfare of the citizens who put them in their positions in the first place and left the masses to fend for themselves.
Call for Transparency and Accountability
The public has the right to be informed where funds are allocated but as of writing, the government has yet to release an official breakdown. Even with a multi-billion budget, Presidential Spokesperson Harry Roque, on May 18, pronounced that the government has no plans regarding mass testing and that the matter will be placed in the hands of the private sector. He also claimed that mass testing is not viable due to the limits of testing capacity and that expanded targeted testing is being implemented wherein only a mere 1-2% of the entire population is covered.
In Duterte’s most recent address, he extended the community quarantine for several areas across the country yet fails again to provide concrete actions in mitigating the effects of the pandemic. Despite piles of debt, the president repeatedly states, “Wala na tayong pera ngayon.”
According to IBON Foundation, a non-government organization (NGO), the government has the capability to gather money outside of debt, however, it is waived to serve the interests of business giants. Under the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE), corporate income tax decreases from 30% to 25% from July 2020 up to 2022; this sums up to Php 667 billion worth of foregone taxes over the next five years. Taxes that could have been used to fund COVID-19 initiatives are relinquished at the expense of protecting moguls. The resumption of the Better Business Bureau (BBB) is also on the works which paves the way for the tax cuts of big businesses to help them recover from the pandemic.
Priority setting may also affect the willingness of external lenders to loan money to the country. Amid the lockdown, millions of Filipinos are already at risk of losing their jobs but the government still went through with the shutdown of the country’s biggest media outlet where 11,000 workers would lose their jobs. In Professor Luisito C. Abueg’s discussion paper entitled Extended, enhanced, and extreme: macroeconomic implications of the community quarantine in the Philippines due to the COVID-19 pandemic, he said, “The country’s investor confidence has been also strained by issues on other media organizations and outfits (e.g., Rappler and Philippine Daily Inquirer), as well as water concessionaires of the Ayala Group and Pangilinan’s Metro Pacific Investments (due to water shortages in 2019).”
While the loss of investor confidence in these institutions means loss of investors for the country, economic development should also revolve around local supply chains. The agricultural sector’s efforts in providing stable food supply during quarantine should be used to stimulate economic growth and to support national interests. Strengthening the country’s agricultural industry will also create employment opportunities at a time when job security is bleak.
From the Philippine Statistics Authority’s (PSA) April 2020 Labor Force Survey, the percentage of unemployment rose to 17.7 which translates to 7.3 million unemployed Filipinos in the labor force. The employment rate fell from 94.7 percent in January 2020 to 82.3 percent in April 2020 which translates to an 8 million difference in the number of employed Filipinos from 41.8 million in April 2019 to 33.8 million in April 2020. All regions reported double-digit unemployment rates. The highest unemployment rate was in Bangsamoro Autonomous Region in Muslim Mindanao (BARRM) at 29.8 percent. It is followed by Region III (Central Luzon) and Cordillera Administrative Region (CAR) with unemployment rates recorded at 27.3 percent and 25.3 percent, respectively. These are the effects of the COVID-19 economic shutdown on the Philippine labor market.
Transparency and accountability are required from the government especially during these times. The ongoing health crisis should not be an opportunity for excessive and unnecessary borrowing as repayment of these loans will be coming from the pockets of the citizens. The Duterte administration’s method of alleviating economic recession relies on debt which adds to the burden of the poor; this is where the popular sentiment, “Wala pa sa mundo ang mga anak at apo natin, may utang na silang kailangang bayaran,” stems from.
Worse comes to worst, the country’s downfall will not be caused by the virus’ threat but that of kingpins who forward their self-interests. [P]
Abueg, L. (2020). Extended, enhanced, and extreme: Macroeconomic implications of the community quarantine in the Philippines due to the COVID-19 pandemic. College of Economics and Management University of the Philippines Los Baños.
Lopez, M.L. (2020). China-backed AIIB extends $750 million loan for PH coronavirus response. CNN Philippines.
Rivas, R. (2020). World Bank loans $500 million to PH for coronavirus response. Rappler.