More dividends by government corporations, privatization to reduce borrowings
ENERGY, INFRA AND ECONOMICS - Bienvenido Oplas Jr. - The Philippine Star
August 28, 2025 | 12:00am
The House of Representatives Committee on Appropriation continues deliberating on the national budget for 2026. Spending is funded and limited based on (a) consistency with the Medium-Term Philippine Development Plan and (b) projected revenues and borrowings. Agencies cannot just propose a P10-trillion budget when the projected revenues are only P6 trillion, leaving a budget deficit of P4 trillion that requires borrowings of equivalent amounts. No, that is fiscally irresponsible, unsustainable and economically destructive.
From the Budget of Expenditures and Sources of Financing 2026 submitted by the Department of Budget and Management (DBM) and the Office of the President, proposed Disbursements and spending will increase to P6.63 trillion in 2026 from P6.08 trillion in 2025. The projected revenues from taxes and non-taxes will also rise to P4.98 trillion next year from P4.52 trillion this year, so the projected budget deficit will rise to P1.65 trillion from P1.56 trillion this year. To help cover this deficit, net financing (gross borrowing minus amortization) will rise to P1.63 trillion next year from P1.39 trillion this year.
Huge borrowing means huge interest payment aside from huge principal amortization. In 2024, we paid interest payment alone – P763 billion or an average of P2.1 billion a day. Projected interest payment this year would be P848 billion or an average of P2.3 billion a day; next year, P950 billion or an average of P2.6 billion a day and in 2027, will breach the P1 trillion mark – huge.
Many government agencies, upon the prodding of legislators and subsidy-seeking public, and pronouncements of new subsidies by the President himself during his annual State of the Nation Address, are bent on spend-spend-spend. It leaves the Department of Finance (DOF) scratching its head as to where to get new revenues, on top of existing revenues and the need to reduce the need for more borrowings.
Among the important new revenues initiated by the DOF and rightly so, are higher dividends and mandatory remittances by government-owned and controlled corporations (GOCCs).
Data from the Bureau of Treasury show that dividends by GOCCs reached P58.1 billion in 2021, rose to P69.1 billion in 2022, P102.2 billion in 2023, and further increased to P138.5 billion in 2024. This year, January-June dividends already reached P86.81 billion so it is possible to reach at least P150 billion full year 2025. Good.
The biggest contributor to high dividends in 2024 were: Bangko Sentral ng Pilipinas with P53.2 billion, Land Bank of the Philippines with P32.1 billion, PDIC with P10.7 billion, PPA with P5.1 billion and PAGCOR with P4.6 billion, a huge decline from its peak P17 billion in 2020 after POGOs were banned.
In January-June, the biggest contributors so far are: LBP with P26.4 billion, PAGCOR with P12.7 billion, PDIC with P10.1 billion, PSALM with P9 billion, PPA with P5.2 billion, and BCDA with P4.5 billion.
LBP has posted a huge turnaround in dividends to the National Treasury. From an average contribution of P6.2 billion per year in 2013–2016, it increased to P8.4 billion in 2022, dropped to zero in 2023 due to a P50-billion contribution to the Maharlika Investment Corp., then rose to P32 billion in 2024 and P33 billion by July 2025. Huge. Hats off to LBP president and CEO Lynette Ortiz, a decades-long private banker and the first Filipino CEO of Standard Chartered Bank Philippines.
DOF Secretary Ralph G. Recto’s initiative in 2024 to raise the mandatory remittances of GOCCs from 50 percent to 75 percent of their net earnings was good, among the important game changers in Philippines’ public finance policies.
On the flipside of GOCCs sending big remittances and dividends to the National Treasury, many other GOCCs are subsidy-dependent. The worst of these is the National Irrigation Administration (NIA), with a subsidy of P34.6 billion a year from 2017-2022, P40.7 billion in 2023, P71.2 billion in 2024 and P17.7 billion in January-June 2025.
I think it is a wrong policy by the government under the Free Irrigation Service Act (FISA) of 2018. Not all beneficiaries of this law are small farmers, some are corporate farms, private resorts and hotels in the provinces and hence, can afford to pay the service. Now all taxpayers nationwide subsidize these private businesses.
Another subsidy-dependent and wasteful GOCC is the National Electrification Administration (NEA). Its average subsidy from 2012-2024 was P4.3 billion a year. Many electric cooperatives (ECs) in the provinces are inefficient if not outright wasteful. Instead of making these ECs become corporations and private distribution utilities monitored by SEC and not getting subsidies, NEA is the political protector of these ECs and sends them money. Moral hazard problem is created, many ECs have little incentive to be efficient and provide good service (little or no blackout) to their customers because there is NEA that will send them money all the time.
Another good source of government revenues aside from taxes and remittances by GOCCs is privatization of certain government assets and corporations. Privatization proceeds are projected to increase from P3.3 billion in 2024, P5 billion this year and P101 billion in 2026. The star of the show is the privatization of CBK hydro power plant sold by PSALM to Aboitiz Power and partners for P36.3 billion last month. The sale will be finalized in 2026.
Ultimately, the best fiscal consolidation policy of the government would be to control spending, end certain existing subsidies when new subsidies are created. Tell people to become more self-sufficient and not state-dependent seemingly forever. DBM Secretary Amenah Pangandaman and staff will have easier work when there are less subsidy- and freebie-seeking people and agencies. And many public infrastructures are funded via PPP, not via taxes and borrowings.
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