A HOUSE of Representatives think tank has warned of runaway inflation if the government of President Ferdinand R. Marcos, Jr. fails to rein in spending.
“Given the present level of inflation and the inflationary pressure accumulated in the past three years, the risks associated with maintaining a high public spending strategy are not insignificant and, perhaps more importantly, growing over time,” the Congressional Policy and Budget Research Department (CPBRD) said in a report this month.
“The observed relationship between government spending and inflation (or lack thereof) over the past dozen years lends urgency to the necessity of developing a rule-based framework to govern monetary and fiscal policies — particularly to stabilize inflation,” it added.
The CPBRD said that government spending has steadily increased since 2010, indicating that the government does not consider inflation in its spending plan.
The Bureau of the Treasury reported that the government spent P1.52 trillion in 2010, P1.56 trillion in 2011, P1.78 trillion in 2012, P1.88 trillion in 2013, and P1.98 trillion in 2014.
It spent P2.23 trillion in 2015, P2.55 trillion in 2016, P2.82 trillion in 2017, P3.41 trillion in 2018, P3.80 trillion in 2019, P4.23 trillion in 2020, and P4.68 trillion in 2021.
In 2022, government expenditures increased by 10.35% to P5.16 trillion.
“The government constantly runs the risk of exacerbating inflationary pressures and, by extension, heightening the severity of economic contractions,” the CPBRD said.
Inflation in August was 5.3%, the 17th consecutive month in which inflation surpassed the BSP’s 2-4% target range.
In order to ensure proper spending without the risk of inflationary pressures, the government must promote “strategic resource allocation and operational efficiency,” by spending in sectors that give the “largest multiplier effects.”
“A set of rules that compels the government to moderate its spending during times of surging inflation, for example, will likely prove beneficial in managing overall inflationary pressure,” the CPBRD said.
“Perhaps more importantly, enforced rules would make it difficult for political actors to engage in politically profitable but economically costly spending strategies,” it added. — Beatriz Marie D. Cruz