THE Department of Finance (DoF) will focus on reducing the government’s budget deficit in its medium term fiscal plan, incoming Finance Secretary and outgoing Bangko Sentral ng Pilipinas Governor Benjamin Diokno said.

When President-elect Ferdinand Marcos Jr. recently met with members of his economic team, his marching order was for them to produce a medium-term fiscal plan for the next six years.

“The first half of that — 2023-2025 is a detailed fiscal plan. We’ll plan to submit that to Congress for ratification. Thereafter, the budgets for 2023-2025 will be in accordance with the plan. So the main goal is to reduce the deficit-to-GDP (gross domestic product) ratio by the end of his term,” Diokno said.

The government’s budget deficit increased to P316.8 billion in the first quarter of this year, putting it at 6.4 percent of GDP.

By the end of the Marcos administration, the medium-term fiscal plan aspires to transform the Philippines into an upper middle-income economy and reduce poverty by single digit.

On fiscal management, Diokno believes that government spending should be maintained while revenue is raised through efficient tax administration.

“I have not seen the actual level of spending but I think we should not cut spending at this time because we are still recovering and because a huge chunk of that budget is for capital investment,” he said.

The government requires a large sum of expenditure for education and health to “cure” the scarring effects of the Covid-19 pandemic, which is why now is not the time to slash the national budget, the official said..

Diokno believes that the focus should be on how to raise more revenue, noting the most recent tax reforms would help the next administration to reach its revenue targets.

“I think we should improve the tax administration to implement all these reforms,” he said. “We do this, for example, through digitalization, which is more efficient and less prone to graft and corruption.”

In terms of mitigating the impact of rising global oil prices on consumers, Diokno said that the incoming administration will continue its predecessor’s approach of providing assistance to the most affected sector rather than lowering petroleum tax rates.

“Why? Because when you cut taxes on fuel, what will happen is that it will benefit everybody and reach the poor, the middle income, and when there is a need to restore the cut, it’s very difficult to push such measures before Congress. I think it’s a wrong move to cut taxes at this time,” Diokno said.