MANILA, Philippines – In his first year in office, incoming president Rodrigo Duterte will likely have a budget that is P300 billion more than the outlay he will inherit from President Aquino.

Duterte’s budget secretary-designate Benjamin Diokno said yesterday the P3.35-trillion national budget proposed by the Department of Budget and Management (DBM) for 2017 “is just the right amount.” Duterte formally assumes the presidency on June 30.

Diokno said the annual outlay has to keep on going up so the government would be able to address the “increasing needs of the nation.”

Apparently anticipating that revenue collectors of the Duterte administration would not be able to match the collection efficiency of Internal Revenue Commissioner Kim Henares, Diokno and incoming finance secretary Carlos Dominguez have agreed on increased borrowings.

They have set a budget deficit cap of three percent of gross domestic product (GDP), one percentage point higher than the guiding limit used by the Aquino administration. The funding deficit is financed through borrowings.

Diokno said the outgoing administration managed the national debt by limiting the budget gap to two percent of GDP.

“Three percent is still manageable, provided you use the additional one percent for infrastructure and not for increasing the salaries of government employees,” he said.

Increasing borrowings will put an upward pressure on interest rates, which will in turn discourage people from borrowing money for appliances, equipment, vehicles, and homes.

The Aquino government has been able to keep lending rates down by limiting borrowings. This has enabled more people to borrow money from banks for their needs.

Outgoing Budget Secretary Florencio Abad has described the proposed P3.35-trillion outlay for 2017 as a “transition budget (that) aims to bridge the goals and policies of the Aquino government with those of the next administration.”

“With the institutionalization of reforms, this budget will hopefully guide the new administration in the allocation and management of public funds based on the principles of fiscal discipline, operational efficiencies, transparency, and empowerment,” he said.

The proposed budget for President Aquino’s successor is P348 billion more than this year’s P3.002-trillion outlay.

It is based on gross national product growth of 6.3-7.3 percent, GDP expansion of 6.6-7.6 percent, inflation of 2-4 percent, treasury bill rates of 2.5-4 percent, peso-dollar exchange rate of P45 to P48, and crude oil price of $50-$65 per barrel.

It also assumes revenues amounting to P3.040 trillion, up from this year’s projected collections of P2.697 trillion.

“The Aquino administration will entrust a healthier fiscal position to the incoming administration as a result of the various public financial management reforms implemented during its six-year term,” Abad said.

“To maintain this sound and sustainable fiscal environment in the coming years, the government will target a rising revenue effort reaching 18.8 percent of GDP by 2019 and a deficit level of two percent of GDP over the medium term, pending the fiscal strategy of the next administration,” he said.

Abad said Aquino’s successor would also inherit a healthy national economy. “The strong macroeconomic fundamentals, in particular the low and stable inflation environment, favorable interest rates, sustained OFW remittances, vibrant business process outsourcing, and increasing tourism receipts, continue to drive the economy,” he added.