Following a recent visit to Manila, IMF team leader Elif Arbatli Saxegaard highlighted that the government’s Medium-Term Fiscal Program is now focused on a more pro-growth stance, anchored by higher capital spending and a gradual increase in revenues.
Despite the slower pace, the plan remains ambitious, with a goal to reduce the fiscal deficit from 6.2 percent of GDP in 2023 to 3.7 percent by 2028.
Fiscal consolidation refers to the plan to deliberately reduce the government’s budget deficits — the excess in the state’s spending over what it makes, the difference of which is bridged through incurring additional debt.
The current consolidation plan was put in place to reduce the government’s deficit and debt, both of which grew due to massive spending during the COVID-19 pandemic.
Saxegaard emphasized that revenue mobilization will be critical for the success of this strategy, alongside enhancing social protection, health care, and education programs.
Tax administration improvements and broadening the tax base through reforms, such as increasing the efficiency of value-added tax, will be essential for sustaining a credible fiscal consolidation plan.
The IMF also stressed the importance of supporting poverty reduction efforts and financial stability, which remain on solid footing despite higher lending rates.
The IMF team praised ongoing government reforms aimed at attracting foreign investment, which will help drive economic growth and infrastructure development in the coming years.