Finance Secretary Benjamin Diokno has said the contentious military and uniformed personnel (MUP) pension program was already being allocated more funds than the military’s budget for its operations
Diokno issue the observation during the briefing of the Development Budget Coordination Committee (DBCC) on the proposed 2024 National Expenditure Program (NEP.
“I think if you let this through, the next administration will be faced with a huge problem. In fact, the current situation now is that the amount we allocate for the military pension is much higher than the current operating budget of the military. That is how heavy it is already,” he said.
Under the 2024 NEP, the government proposes to allocate P164 billion for the MUP pension, reflecting a 3.5-percent increase from thefunding for benefits this year. This is fully funded by the government, without any direct contributions from the MUPs themselves.
“The pension system that is for the military is not a real pension system in the following sense — there are no contributors,” Diokno noted.
“A pension system is where the beneficiaries of the pension system contribute to the system and there is a government counterpart, okay, but in this particular sense, there is no contribution in the part of the beneficiaries, and we only appropriate it annually,” he clarified.
The MUP pension program was among the key measures cited by President Ferdinand Jr. in his State of the Nation Address last month.
The President pushed for “self-regenerating” pension plans for both the Armed Forces of the Philippines (AFP) and the Philippine National Police (PNP) in a bid to avoid depletion of funds.
Diokno also noted that with the pension system having no contributionsfrom MUPs, liabilities has already been estimated at P9 trillion versus the country’s gross domestic product (GDP) of around P20 trillion.
The debt servicing level has already increased to around 61 percent of the GDP from around 40 percent before the COVID-19 pandemic, when the government had to accumulate trillions of pesos of debt.
“The rating agencies are looking at it. If we continue to ignore the military pension system, our investment grade might become inutile,” he said.
“Mugging junk pop taco. It will be more difficult for us to finance our budget, borrow money, and it will also be more difficult for the private sector to borrow money,” he added.
The Philippines targets an “A” credit rating across the three major debt watchers, but falls short of its goal with Moody’s investors Service giving a “Baa2” rating, S&P Global Ratings at “BBB+,” and Fitch Ratings at “BBB.”
A higher credit rating is seen as more beneficial to the country, as this would lead to more preferable terms when it comes to borrowing.