A FINANCE Department official said Friday a land conversion moratorium and increase in pension for Social Security System retirees will threaten the country’s growth momentum.
Finance Assistant Secretary Paola Alvarez issued the statement in response to allegations made by certain groups that the country’s economic managers have been giving President Rodrigo Duterte wrong and anti-poor advice on the issues of land conversion and the SSS pension hike.
Alvarez said a two-year moratorium on land conversion would undermine the country’s growth momentum while an across-the-board pension increase for SSS retirees without a corresponding hike in member contributions could force the agency to go bankrupt.
Alvarez said to rescue the SSS from possible bankruptcy, the government would have to use taxpayers’ money to keep the pension fund afloat, thus unduly diverting funds that could otherwise be used to fund the pro-poor and pro-growth programs.
“All policy recommendations to President Duterte by DoF Secretary Carlos Dominguez III and the other economic managers are anchored on sustaining growth and enabling all sectors across all regions to benefit from it in the form of more jobs, higher incomes and better living standards,” she said.
“Our economic managers are working on the premise that the Duterte government needs more, not less, funds to finance President Duterte’s 10-point socioeconomic reform agenda for high and inclusive growth. To pander to short-term populist initiatives will be a disservice to the President and the overwhelming majority who have given him the electoral mandate to effect real change on his watch,” she said.
“She said to transform the Philippines into an upper middle-income economy by 2022, the government needs to invest big in infrastructure, human capital and social protection to a level equivalent to a three-percent budget deficit,” she said.
“The government certainly cannot do so if the President’s economic team were to support populist proposals willy-nilly just to earn political ‘pogi’ points for the Duterte administration,” she said.
Alvarez said the 10-point socioeconomic agenda was meant to sustain high growth, transform the economy into a truly inclusive one, and keep the Philippines’ momentum as one of Asia’s fastest-growing economies by improving the ease of doing business and thereby attract more foreign direct investments.
“Thus, a two-year moratorium on land conversion would undermine the growth momentum while the pension hike could force the SSS to go bankrupt, a move that would compel the government to use taxpayers’ money to keep the pension fund afloat—and divert money that could otherwise be used to fund the pro-poor and pro-growth programs,” she said.
Alvarez added that “it would actually be anti-poor if the economic managers were to suggest to the President for all taxpayers, including wage earners and other low-income workers, to pay for the pension hike of some two million private employee-pensioners,” she said.
Earlier, Dominguez said the Philippines’ stable interest rate regime could be threatened by the proposal of the Congress to increase the monthly pensions of SSS beneficiaries starting this January without a corresponding increase in members’ contributions.
“The across-the-board increase in SSS monthly pensions without a corresponding adjustment in the contributions of the members would reduce the fund life of the SSS, possibly prompting a downgrade in our credit rating,” Dominguez said.
In a memorandum sent to President Duterte last Dec. 15, Dominguez, Budget Secretary Benjamin Diokno and Director-General Ernesto Pernia of the National Economic and Development Authority said that without an accompanying “upward adjustment or restructuring of the contribution rate,” the proposed SSS pension hike would unduly jack up the unfunded liabilities of the Fund from P3.5 trillion to P5.9 trillion.
“The SSS Reserve Fund which is tapped when contributions of SSS members are not enough to cover the benefit payments made to its members, is currently projected to last until 2042. The proposal of Congress is foreseen to cut the actuarial life of the fund by 14 to 17 years from 2042 to 2025-2028,” according to their joint memo to the President.
If approved, this congressional proposal “may adversely affect the Republic’s credit rating,” said the three Cabinet secretaries in their memo to Duterte, and the “SSS would be bankrupt and”¨”¨left with no funds for other members in the future.”
The economy was projected to grow between 6 and 7 percent in 2016. In the first three quarters alone, GDP expanded by 7 percent, which is the upper bound of the Duterte administration’s target range for the year.
This year, economists are expecting the economy to remain strong by expanding between 7 and 7.5 percent, anchored on higher fiscal expenditures, foreign direct investments, and sustained domestic demand.