Finance Secretary Ralph G. Recto has set the record straight on the move to sweep government-owned and controlled corporations’ (GOCCs) idle funds, underscoring that the Department of Finance (DOF) is merely adhering to Congress’ order under the General Appropriations Act (GAA) of 2024, the benefits and contributions of PhilHealth members will remain untouched, and that the projects to be financed by the excess funds will create more jobs and accelerate the country’s economic growth.

“To fund the unprogrammed appropriations, Congress determined that there is another way aside from new taxes as well as debts. At ito ay sa pamamagitan ng pagkolekta sa mga natutulog at hindi nagagamit na pera ng GOCCs na binabayaran pa natin ng interest. Ito po ay mismong nakagalay sa 2024 GAA na aming sinusunod lamang,” he said before the Senate Committee on Health and Demography during the Inquiry on the Implementation of the Universal Health Care Act, Including the Utilization of PhilHealth Funds for Program Benefits on July 30, 2024.

The Finance Chief addressed erroneous statements making rounds in social media, emphasizing the legal basis behind the use of the PhilHealth’s unutilized funds to finance projects under the Unprogrammed Appropriations.

Secretary Recto said the DOF moved in line with Republic Act No. 11975 or the GAA 2024, which was approved by the Congress.

The DOF first reviewed and studied the provision to determine its merit, assessing if it will help in growing the economy.

The DOF also consulted the Governance Commission for GOCCs (GCG) and sought the legal opinions of the Government Corporate Counsel (OGCC) and the Commission on Audit (COA) to ensure full compliance with the law.

The DOF received favorable legal opinions on the matter and was advised that PhilHealth’s PHP 89.9 billion unutilized government subsidies are not part of its reserve funds, nor income that is being restricted by the Universal Health Care Act to be used by the national government as a general fund.

“Ito ang payong legal na aming sinusunod. At hindi lamang ito legal, ito’y makakatulong sa paglago ng ekonomiya at pagbibigay ng trabaho,” Secretary Recto stressed.

He emphasized that the funds will be exclusively used for the list of projects identified under the Unprogrammed Appropriations as mandated by the 2024 GAA.

He also assured the public that the funds will benefit health-related projects, which in fact enabled the national government to release the PHP 27.5 billion representing 5.04 claims of long-overdue benefits and allowances of frontliners during the pandemic.

The projects under the list of Unprogrammed Appropriations include but are not limited to the Davao City By-Pass Construction Project; Samal Island Davao City Connector Project; Panay-Guimaras-Negros Island Bridges; Bataan-Cavite Interlink Bridge Project; Metro Manila Subway Project; and the Salary Standardization VI for government employees.

Full list of the projects is attached in this press release or can be accessed here: https://www.dof.gov.ph/download/unprogrammed-appropriations-projects/?wpdmdl=45139&refresh=66a83553a57081722299731

“Our cost-benefit analysis shows that the projects to be funded by the Unprogrammed Appropriations–na utos ng Kongreso–will hike real [gross domestic product] GDP growth by 0.7%, increase an additional P23-24.4 billion in revenues, and create hundreds of thousands of jobs,” Secretary Recto said.

Implementing these projects will help the government hit its target of 6% to 7% growth for the year, especially after Typhoon Carina ravaged Metro Manila, the country’s economic powerhouse that comprises 31% of its GDP.

According to the Finance Chief, many of the projects are Official Development Assistance (ODA) or foreign assisted projects, under which the government is committed to honor its financing obligations, or failing to do so, pay commitment fees and interests on the loans.

“[I]f we deny them of funding, the implementation is delayed, and we rack up opportunity costs that will be borne by the public deprived of the conveniences such projects bring,” Secretary Recto said.

The Finance Chief warned that if the projects were to be funded with additional borrowings, it would increase the country’s deficit-to-GDP ratio from 5.6% to 6.4% in 2024, and also hike the debt-to-GDP ratio from 60.6% to 61.4% this year.

This means that the country will have to pay an additional PHP 12.7 billion in interest payments every year.

“In effect, we will not hit our Medium-Term Fiscal Program. And this may put pressure on our investment grade rating,” he said.

A credit rating downgrade will increase the country’s borrowing rates by around one full percentage point, translating to additional interest payments of at least PHP 15 billion pesos annually.

In addition, a downgrade will also generate significant uncertainties that may destabilize the country’s macroeconomic environment and jeopardize the Philippines’ recovery efforts from the pandemic.

Secretary Recto also debunked claims that the excess funds will be transferred to the Maharlika Investment Fund (MIF).

He also clarified that only PHP 20 billion has so far been remitted by PhilHealth to the Bureau of the Treasury (BTr), stressing that the DOF respects its cash management operations and follows a remittance schedule.

The Finance Chief assured the Senate that PhilHealth is more than sufficiently funded with a PHP 500 billion benefit chest fund to pay for its members’ multi-year claims. Furthermore, the agency will continue to receive subsidies from the national government.

He said PhilHealth is even expected to increase its benefit packages next year.

“PhilHealth na mismo ang nagsabi na ni isang kusing, walang kaltas sa mga benepisyong matatanggap, batay sa kasalukuyang patakaran. Bagkus, nabanggit pa nga ng Pangulo sa kanyang SONA na tataasan ang mga benepisyo ng PhilHealth para sa mga outpatient, mga may malulubhang karamdaman gaya ng cancer, at mga batang may kapansanan,” he said.

As discussions for the 2025 National Expenditure Program (NEP) commence, Secretary Recto sought Congress’ help in carefully choosing projects in the budget that create the most economic growth and more jobs.

“But please curate the expenditure program without inflating the unprogrammed appropriations side, because this distorts the country’s fiscal plan,” he stressed.

He called on both the Executive and Legislative branch to operate within the parameters of the Medium Term Fiscal Program that reduces the country’s deficit and debt gradually, creates jobs, and decreases poverty in the process.

“At the end of the day, my dear honorable members of the Senate, dahil kayo ang may akda ng GAA na pinapatupad namin — magsabi lang po kayo ng inyong mga panukala kung paano popondohan ang mga proyektong nasa pambansang badyet, at handa kaming makinig at sumunod sa inyong utos,” he said.

Secretary Recto also assured the public that there is no advocate more committed to higher health spending than the DOF.

During his tenure as a legislator, Secretary Recto championed the Doktor Para sa Bayan Act and the Regional Medical Center Act. He is also the principal author of the Universal Health Care Act.

Meanwhile, his amendments to Tax Reform for Acceleration and Inclusion (TRAIN Act) and RA No. 11467 (Sin Tax Law) removed the sales tax on medicines for diabetes, high cholesterol, hypertension, cancer, mental illness, tuberculosis, and kidney diseases.