The Department of Finance (DoF) said yesterday the Philippines will not face any sanction or punishment from any international creditor if it fails to meet the two percent deficit-to-gross domestic product ratio that the Development Budget Coordination Council (DBCC) set.

“No punishment. We don’t borrow anymore from them,” Undersecretary Gil Beltran told the Daily Tribune in an interview recently.
It can be recalled that the DBCC has set a two percent deficit to gross domestic product (GDP) deficit.
DBCC, which is made up of DoF, Department of Budget and Management, National Economic and Development Authority and Bangko Sentral ng Pilipinas, is a four-agency department that oversees and manages the economy.
Earlier, Beltran said meeting the budget deficit hinges on the Bureau of Internal Revenue’s ability to meet its target collection.
The government wants to limit the budget deficit to percent of GDP in 2013 until 2016.
With an annual GDP between P6.7 trillion to P7.1 trillion for the last few years, a two percent deficit-to-GDP will be around P240 billion or less.
In recent history, it was Ireland that registered the highest deficit-GDP-ratio at over 14 percent in 2000, according to former Finance secretary and now Philippine Stock Exchange chairman of the board Jose Pardo.
However, the DoF seems worried it will be able to meet the target deficit as the number for end-March of P66.47 billion was already more than double of how much was registered in same period last year.
“Although there is no penalty from any entity, a huge deficit will mean that we lack fiscal discipline. We cannot push it to the limit if the DBCC number will not be met,” another source, who refused to be named, told The Tribune.

Many local manufacturers remained in the survival mode despite the peso sliding back to 42 level, a letter to the Philippine Exporters Confederation (PhilExport) obtained by The Daily Tribune revealed.
Oscar Barrera, who represents PhilExport in a recent competitive currency forum (CCF), believes that local businesses sell more products even at low prices to compensate for reduced earnings.
“When a businessman is experiencing lower profits, his survival instinct is to sell more, as long as his revenue is greater than his cash costs of production or direct variable costs.
And even if he is already losing cash, he will try to survive by borrowing until his bank finally forecloses on his properties. He will continue to pray and hope that things will turn around,” Barrera told PhilExport president Sergio Ortiz-Luis.
He said although the peso strength has tempered, the long appreciation of the peso against the dollar continued to hurt exporters even as the country’s exports revenues rose measly in March 2013.
“Our major exports are on contracts, so volumes may still be going up even though exporters are already losing due to strength of peso,” he explained.
Barrera, the PhilExport trustee for the chemicals sector, expressed concern that these manufacturers would find it increasingly difficult to survive given the peso value against the dollar.
A source at the export sector said although impossible, it is ideal that the exchange rate should be around P43.20 to $1.
The peso has been closing at 42-level for the past two weeks. Last May 21, it reached its highest at P41.17 from P41.14 average rate in April.
A survey conducted by PhilExport on the effects of the strong peso showed that a number of small and medium enterprises exporters and agriculture firms preferred higher range of foreign exchange at P42 to P44 to $1.
To help stem the peso appreciation, Barrera underscored the need for the Philippines to impose capital controls on inflows similar to the one being planned by Thailand.
He recommended imposing “tobin” tax on hot money used in speculative investments in the stock and currency markets or a holding period of foreigners’ remittances out of the country.
Barrera said the removal of controls on outflows provides reassurance to the hot money speculators of complete freedom of entry and exit.
Moreover, Barrera believes that foreign direct investments (FDIs) are bypassing the country because there are very few profitable projects.
Apart from scarce power, labor costs and lack of logistic public infrastructure, he said the overvalued peso discourages any local value added inputs because imported inputs are artificially cheaper.

As the new debt instrument is set to be launched by fourth quarter, there are still no development regarding the new government security coming from the Bureau of Treasury (BTr), the agency that will issue the sovereign note.

National Treasurer Lea de Leon has no much reply when The Tribune asked her what will be the tenor, coupon rate, spread and how much does the new instrument will yield for the national government.
Even the date when it will be released is now being denied when it was asked if it will surely be launched by the fourth quarter.
“No definite schedule yet. None yet,” De Leon told the Daily Tribune.
It was learned through some sources that at least P10 to P12 billion is needed to get the remaining 52 percent at the MRT-3.
In 2010, the national government coughed out P7.87 billion to pay the MRT Corp. of the Sobrepenas, the operator of the metro train.
However, De Leon hasn’t admitted that the money to be raised from the new debt instrument will be used to pool money to get the remaining 52 percent share outside the control of Manuel Pangilinan through Metro Pacific Investments Corp. (MPIC).
“Not really,” was her answer when The Tribune asked if the amount to be raised by BTr will be used to get the 52 percent share at the mass transit system.
Originally, the firm of Pangilinan wanted to buy all the stakes at MRT amounting to around $1 billion in November 2011 but only 48 percent was given to the firm.
It has never been admitted by BTr that the amount to be raised from the new debt note will be used to buy back the shares still owned of by firms other than MPIC.
MRT-3, built in 1999, has 13 stations along its 16.95 kilometer track which passes through Makati, Mandaluyong, Pasay and Quezon City.
While originally intended to decongest Edsa, the MRT-3 has been only partially successful in decongesting the main highway of the country. Congestion is further aggravated by the rising number of motor vehicles.