There’s funding to respond to COVID-19 – the problem is at the top

POLICY NOTE

The
Duterte administration is still not clear on what its COVID-19
response is and how much this will cost. On top of that, it also
doesn’t know how to fund this because it refuses to let go of its
sacred cows – infrastructure, debt service, and the accumulated
wealth and profits of the country’s economic elite.

Millions
of poor Filipino families are suffering the worst mass unemployment
in the country’s history because of the military lockdown since
March. This has even been extended for another two weeks. Yet,
tragically, the nation still does not know how far it really is in
dealing with its worst public health crisis ever.

It
is over two months since the first confirmed case of COVID-19, nearly
four weeks into the unprecedented lockdown, and over two weeks into
pandemic emergency powers. The Duterte administration’s confusion
and disarray in responding is unforgiveable and a disservice to the
heroic efforts of so many Filipinos including in the lower levels of
government and private sector volunteers.

Even
worse, based on what little we know, the Duterte administration’s
response is not just unclear but also slow and even stingy. This
means that millions of Filipinos are facing more difficulties today
than ever, and also that there will be a deeper socioeconomic crisis
going on long after the lockdown is lifted.

Billions
to respond

The
clearest sign that things are so unclear for the administration is
its inability to say exactly what its COVID-19 response is and what
budget is needed.

When
the military lockdown was declared, the government announced a
Php27.1
billion

package versus the pandemic. This was a haphazard
cobbling together for
crude public relations purposes
of mainly recycled
pre-pandemic government programs, including a completely irrelevant
Php14
billion
for
tourism.

Pressed
for something more substantial, it superseded that first package and
threw a Php275
billion

figure into the air during the railroading of emergency powers
through Congress. This supposedly consisted of Php200 billion for
emergency subsidies and Php75 billion for health care.

Two
weeks and two reports to Congress on the use of emergency powers
later, that Php275 billion is still the representative figure and the
closest thing to a summary of the government’s COVID-19 response.

In
the meantime, the government reports what are meant to be impressive
efforts at raising funds
for its COVID-19 response – Php300 billion from the sale of
government securities, Php189.8 billion in unreleased appropriations
and realignments, Php121.6 billion in advanced remittances of
dividends to the national government from government-owned and
-controlled corporations (GOCCs), Php22 billion in unutilized cash
balances and funds, and Php10.3 billion in additional cash
allocations and allotments.

Mechanically
adding these up gives the impression of Php644.1 billion already
available from various sources. However, at least Php143.6 billion or
22% of this – the early dividends and unutilized cash – is
actually not a literally new budget for the response and just about
ensuring there’s cash at hand to immediately spend. The economic
managers are also looking at US$2
billion

from multilateral lenders.

Seeing
so many numbers is bewildering – so where exactly are we?

What
response?

The
logical place to start is from identifying what needs to be done.
It’s a straightforward matter to just list what the government
itself has already identified as needed, whether by the National
Economic and Development Authority (NEDA)
or as implied in the president’s reports to Congress.

There
are the health interventions: personal protective equipment (PPE) and
other logistical support for medical frontliners and responders; mass
testing and surveillance; isolation and quarantine facilities in
congested urban poor communities; and treatment facilities including
medical supplies.

There
are also the equally critical socioeconomic relief measures:
emergency relief packages, cash transfers and other financial
assistance, and business support for micro, small and medium
enterprises (MSMEs).

And
yet, so deep already into the crisis, the Duterte administration has
failed to present a clear response plan to the public. Instead, the
nation is fed a daily stream of anecdotal reports about its
fragmented efforts. Clearly, these efforts are far from enough. The
lived experience of thousands of frontliners and millions of
locked-down households is stark neglect and unnecessary difficulties
mounting by the day.

The
president’s disorganized reports to Congress on March
30
and
April
6
are of
little help and in many ways just add to the confusion.

Compiling
the various measures scattered in the reports shows the government
apparently having plans worth Php233.9 billion. This includes Php38.6
billion for hospitals and other health facilities, Php114 million for
emergency relief packages, Php154.4 billion for cash transfers and
other financial assistance, and Php40.8 billion for local government
units (LGUs).

This
is getting close but still doesn’t correspond to the headline
Php275 billion figure. The president’s reports to Congress seems to
detail the Php200 billion emergency subsidies portion a little bit
while leaving a gaping void in what the supposed Php75 billion for
healthcare is about. In any case, something’s wrong if the
government’s plan has to be built up in such a piecemeal manner.

Slow
response

The
need for clarity about the response doesn’t just come from being
unnecessarily obsessive-compulsive about details. Clarity about the
response is the starting point of marshalling public resources and
organizing the machinery for the immediate and effective response
demanded by the crisis.

The
disarray goes far in explaining the sluggish response of the
administration to date. IBON estimates that up to 18.9
million

workers in the formal and informal sector have been dislocated by the
military lockdown, 14.5 million of whom are in Luzon and the other
4.4 million in the rest of the country. ‘Dislocated’ is
understood as work interruptions of some sort with varied risks of
corresponding losses in wages, salaries and other income.

The
month-and-a-half lockdown-induced disruption in incomes and
livelihoods has dire consequences for the poorest 16.1 million
low-income families in the country. Their monthly incomes are at most
around Php20,000 or so, according to IBON estimates using data from
the latest 2018 Family Income and Expenditure Survey (FIES) of the
Philippine Statistics Authority (PSA). These poorest three-fifths
(64%) of families are also those who have no or little savings to
speak of, according to the Bangko Sentral ng Pilipinas (BSP).

The
government itself has acknowledged the vulnerable situation of the
overwhelming majority of the population. The Bayanihan
to Heal as One Act (Republic
Act 11469
)
explicitly said that 18 million low-income households –
corresponding to around the poorest 75% of the population – will be
given emergency subsidies.

Yet,
so long into the lockdown, the government response has been painfully
slow
and inadequate
.
It seems to have waited until hunger and unrest became critical. This
is exemplified by the frustration of the urban poor residents of Bgy.
San Roque, Quezon City in the heart of the capital who were violently
dispersed, and bizarrely, 21 of whom were even detained and charged.

It
took three long weeks before emergency cash subsidies were released.
And yet these have still so far only reached 3.7-4.9
million

poor households – the government’s report is confusing – or not
even one third (20-27%) of the supposed target 18 million households
under RA 11469. Over two-thirds or as much as 11.5 million badly
affected families are still waiting.

Adding
insult to injury, the government could have reached as much as 10-15
million households immediately
upon the lockdown three weeks ago. Also, the president has only been
able to report just a paltry 190,217
food packs distributed by the Department of Social Welfare and
Development (DSWD). Underfunded local government units (LGUs), civil
society groups, and concerned citizens have tried their best to fill
this gap.

The
government’s other emergency relief programs are doing even worse.
The Department of Labor and Employment (DOLE) reports just 102,892
formal sector workers given Php5,000 in cash assistance under its
COVID-19
Adjustment Measures Program (CAMP) – or barely 1% of 10.7 million
workers in formal establishments nationwide. Only 55,934
informal workers have benefited from DOLE’s Tulong
Panghanapbuhay sa Ating

Disadvantaged/Displaced Workers (TUPAD), receiving just an average of
Php3,121 each.

Up
to 357,614
farmers and fisherfolk have supposedly been given zero interest loans
under the Department of Agriculture’s (DA) Expanded Survival and
Recovery Aid (SURE Aid) project, or granted loan payment moratoriums.
This is just 3.7% of farmers, farm workers and fisherfolk nationwide.
The president’s report however could not say how much this support
was worth.

Stingy
response

The
Duterte administration may be giving repeated anecdotal reports to
give the impression of sustained help. The response however is still
clearly very slow.

At
least part of the reason is the government rationing the help and
putting so many bureaucratic hurdles for poor families. However, the
importance of ensuring that all the neediest are covered far
outweighs the redundance of some less needy being included. Choosing
to err on the side of inclusion means dispensing with these hurdles.

But
the response is also stingy in two respects.

First, the amounts being given
are very small. Beneficiaries will welcome any aid given to them but
the amounts fall far short of even the government’s underestimated
official poverty line of on average Php10,727 nationwide and
Php11,951 in the National Capital Region (NCR).

It
is also probable that reported cash transfers for the poorest are
bloated
because the amounts likely include prior entitlements before the
pandemic.

Secondly,
the Php275 billion response package is too small to provide critical
subsistence support to the millions of affected households during the
lockdown and in the immediate period right after. It is also far
below the order of magnitude needed to support the consumption-driven
stimulus that the economy needs to moderate the economic collapse in
2020.

IBON
is among many others that have pointed out that the relief measures
have to be much more ambitious. Our estimate is that Php297.1
billion

monthly is more sufficient and should be given for up to 2-3 months
at least. This does not yet even include perhaps Php300-400 billion
in crucial support for critically
affected businesses
especially the country’s 998,000 or so micro,
small and medium enterprises (MSMEs).

Funding
the response

The
president’s lamentation in his last report on government’s
response about lack of funding of course raises a valid point.
Hundreds of billions of pesos are needed not just to contain the
pandemic but to keep the economy from sinking further after the
lockdown, and particularly amid the global recession. This is not
even to speak of what’s needed in the coming years to build a more
stable and self-reliant economy.

This
is where the Duterte administration is particularly stumbling. It
either does not appreciate the difficulties faced by the people and
the economy,
or chooses to be insensitive because it refuses to even consider the
radical measures needed to address these.

The
government can find the funding for COVID-19 response measures needed
– on a scale many times over its Php275 billion program – if it
genuinely wants to. The administration basically has three areas of
financing:

1.
Budget realignment.
It
can realign existing budget items under the Php4.1 trillion General
Appropriations Act (GAA) for 2020 and Continuing Appropriations from
2019. This includes using savings from existing projects, activities
and programs to outright discontinuing them and then diverting
budgets to COVID-19 response.

The
president’s first report to Congress mentioned Php372.7 billion in
unreleased special purpose fund (SPF) allotments. This was presumably
mentioned as the initial universe of budget items that can be
realigned. By the second report, Php189.9 billion was said to have
already been so realigned (including Php100 billion to the DSWD); a
large part are reportedly from capital outlays.

However,
the government can be much more aggressive in considering budget
items for realignment. The Php9.6 billion in dubious confidential and
intelligence funds – including Php4.5 billion just for the
president – is a start.

The
Php989 billion public infrastructure program should be opened up to
greater scrutiny. The feasibility studies of these projects were all
drawn up at a time of giddy optimism about the economy. However
previous assessments of economic and financial viability will no
longer hold in today’s greatly changed conditions. At the very
least, the social need for many of them will have been overtaken by
pandemic-related needs.

The
current crisis can also be used to justify at least a moratorium on
the government’s debt payments. The SPF includes Php451 billion
just for debt service on interest payments. Outside the GAA, there is
also Php582 billion for principal amortization. Political will can
overcome accustomed automatic appropriations and the habitual
deference to creditors.

2.
Solidarity financing
.
The administration can
resort to increased borrowing but prioritizing those with favorable
terms for the country. The administration has already sold Php300
billion in government securities to the BSP in a classic monetizing
of the deficit. It is also looking into borrowing US$1.25 billion
from the Asian Development Bank (ADB) – aside from US$8 million in
grants – and possibly another US$1.1 billion from the World Bank.

However,
the government can consider issuing special COVID-19 bonds targeted
especially at large corporations, financial institutions and
oligarchic families. There is a huge concentration of financial
resources and wealth in this regard that can be mobilized beyond
individual donations during the lockdown. This is debt but it can be
designed more on solidarity terms rather than on crude financial
metrics to minimize the burden on the government. For instance, they
can be at low, zero or negative interest rates, be zero coupon, and
also be tax-exempt. Perhaps Php300-600 billion can be raised in this
way.

3.
New progressive taxes.

With a view to the longer term, the administration can actually
consider new taxes on those who can afford this. It is worth
recalling that the TRAIN Law lowered the personal income taxes (PIT),
estate taxes and donor taxes on the country’s higher-income groups.
This already resulted in Php117 billion in foregone revenues in 2018
– with initial projections of foregone PIT revenues of up to
Php193.5 billion in 2022.

The
government can consider starting with reverting personal income,
estate and donor taxes to pre-TRAIN levels. This focuses on those who
despite the pandemic are still in a much better position to
contribute to the national effort. Tax levels can be fine-tuned to
preserve tax benefits for middle-income households affected by the
pandemic and the economic crisis to come.

COVID-19
has highlighted the critical importance of government intervention
and public resources in a time of crisis. But it should have also
drawn attention to how government intervention is also needed to
address chronic problems of poverty, inequality and underdevelopment.

The
radical shifts in economic policies the country needs after the
pandemic and entering into a world economy in recession will demand
huge government resources, among other interventions. Building up the
public health system is just the start and the country’s
agricultural and industrial system needs to be significantly and
rapidly bolstered. A progressive tax system is among the many crucial
policy measures for this.

Unprecedented
crisis

Time
is running out for the Duterte government to put together a bold a
COVID-19 response package. The country is still at the start of a
steeply rising curve of infections and fatalities. After the
lockdown, the economy will be facing a steeply falling curve of
severe economic crisis.

Every
day of delay means more distress for the poorest and most vulnerable,
micro entrepreneurs and small businesses sinking, and of course the
virus just waiting to spread even more rapidly once the lockdown is
lifted.

The
priority is saving lives and easing hardship. The problem right now
is not lack of a national effort to deal with these – so many
Filipinos are struggling everyday to deal with the pandemic and they
deserve all the help they can get.

But
as so many are already realizing – the problem is at the top. ###

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