Finance Secretary Ralph Recto on Tuesday said the unutilized government subsidies will be used exclusively to fund the list of projects identified under the unprogrammed appropriations as mandated by the 2024 General Appropriations Act (GAA).

Recto, during the Senate Committee on Health and Demography’s inquiry on the implementation of the Universal Health Care Act, including the utilization of PhilHealth funds for program benefits, said that if the projects were to be funded with additional borrowings, it would increase the country’s deficit-to-GDP (gross domestic product) ratio from 5.6 percent in 2023 to 6.4 percent in 2024.

He said this would also hike the debt-to-GDP ratio from 60.6 percent to 61.4 percent this year.

Recto said this means the country will have to pay an additional PHP12.7 billion in interest payments every year.

“In effect, we will not hit our Medium-Term Fiscal Program. And this may put pressure on our investment grade rating,” he added.

A credit rating downgrade will increase the country’s borrowing rates by around one full percentage point, translating to additional interest payments of at least PHP15 billion annually.

Recto said a downgrade will also generate significant uncertainties that may destabilize the country’s macroeconomic environment and jeopardize the country’s recovery efforts from the pandemic.

He said the projects under the list of unprogrammed appropriations include but are not limited to the Davao City By-Pass Construction Project; Samal Island Davao City Connector Project; Panay-Guimaras-Negros Island Bridges; Bataan-Cavite Interlink Bridge Project; Metro Manila Subway Project; and the Salary Standardization VI for government employees.

“To fund the unprogrammed appropriations, Congress determined that there is another way aside from new taxes as well as debts,” Recto said, adding this is through collecting the idle and unused money of government-owned and controlled corporations (GOCCs).

“Our cost-benefit analysis shows that the projects to be funded by the Unprogrammed Appropriations –na utos ng Kongreso (ordered by Congress) –will hike real [gross domestic product] GDP growth by 0.7 percent, increase an additional PHP23 (billion)-PHP24.4 billion in revenues, and create hundreds of thousands of jobs,” he said.

Recto said implementing these projects will help the government hit its target of 6 to 7 percent growth for the year, especially after Super Typhoon Carina ravaged Metro Manila, the country’s economic powerhouse that comprises 31 percent of its GDP.

During the inquiry, Recto reiterated there is a legal basis behind the use of the PhilHealth’s unutilized funds to finance projects under the unprogrammed appropriations.

He said the DOF moved in line with Republic Act No. 11975 or the GAA 2024, which was approved by the Congress.

The DOF first reviewed and studied the provision to determine its merit, assessing if it will help in growing the economy and also consulted the Governance Commission for GOCCs.

Recto said the DOF also sought the legal opinions of the Government Corporate Counsel and the Commission on Audit to ensure full compliance with the law.

He added the DOF received favorable legal opinions on the matter and was advised that PhilHealth’s PHP89.9 billion unutilized government subsidies are not part of its reserve funds, nor income that is being restricted by the Universal Health Care Act to be used by the national government as a general fund. (PNA)