MANILA, May 27 -- From 2017 to 2022, the government will embark on an expansionary fiscal policy to finance the country’s development priorities, boost economic growth, and ultimately achieve the administration’s objectives of rapid poverty reduction.
The expansionary fiscal policy will be characterized by increased government spending, particularly on public infrastructure and social services. This fiscal strategy will be made possible by maintaining the deficit-to-GDP ratio at 3 percent while improving revenue effort through tax policy and tax administration reforms.
The deficit will be financed primarily through borrowings, following an 80-20 mix in favor of domestic sources. This mix minimizes foreign exchange risks.
Despite the increased deficit, the debt levels of the Philippine economy will remain to be manageable and sustainable (see Figure 1). In fact, projections from government authorities show that the debt-to-GDP ratio of the Philippines is on a downward trajectory. In 2016, it was recorded at 42.2 percent and is expected to decline gradually to 36.7 percent by 2022.
In terms of revenue effort, the Comprehensive Tax Reform Package being sponso