The congressional investigation on the alleged misuse of confidential funds by the Department of Education (DepEd) has once again thrust financial transparency into the national spotlight. While the investigation remains incomplete, and no judgments should be made prematurely, it underscores the urgent need for vigilance against the misuse of public funds, particularly in the context of the country’s growing national debt and low per capita income.

The controversy is just the latest in a series of high-profile cases that have gained public attention over the years.  For example, we have read about the Pharmally scandal (where P11.5 billion was reportedly awarded to politically connected entity/ies through overpriced contracts amidst the suffering of our people during pandemic years) and the Napoles scam (involving some P10 Billion of the Priority Development Assistance Fund where siphoned off to some public officials), among others. Quite recently, we were also made aware of the miraculous transfer by Congress of  P70 Billion proposed budget for infrastructure projects under the National Expenditure Program to the budget’s Unprogrammed Fund — translation: no definite funds for these essential projects which, in fairness to DoF Secretary Ralph Recto, could have been the real reason why he moved unutlized funds of two government corporations to the national fund to help bankroll public programs and projects pursuant to an authority granted him under the law.

The debt burden

As of the first half of 2024, the Philippines’ sovereign debt ballooned to a new record high of P15.689 trillion (up from P14 trillion in 2023), or around 61% of the country’s gross domestic product (GDP). The DBM estimates that our debt per Filipino has more than tripled from 20 years ago, from P45,652.00 to P138,684.00. The efficient and transparent use of these borrowed funds is crucial to avoid burdening future generations with unsustainable debt levels.

The investigation on DepEd’s use of confidential funds highlights this concern. Confidential funds are typically reserved for security-sensitive operations and are subject to limited public scrutiny, making their proper management even more critical. The inquiry raises questions about how public resources must be effectively managed, particularly at a time when the nation is accumulating significant debt.

Cost of corruption

Corruption is not just a legal or political issue – it has real and tremendous adverse economic consequences. The Asian Development Bank estimates that it costs the Philippines 1% to 2% of its GDP annually. These funds should go toward essential projects and services instead of being siphoned off to the pockets of unscrupulous individuals, inflating public debt to the further detriment of our suffering people. 

National debt and GDP

With the Philippines’ debt-to-GDP ratio currently at around 61%, the nation is not far from the upper limits of what is considered manageable for an emerging economy. The International Monetary Fund (IMF) recommends that countries like the Philippines keep a debt-to-GDP ratio below 70% to avoid financial instability. As the country continues to borrow, the risk of crossing this threshold becomes more pronounced – especially if corruption continues to eat away public funds intended for long-term development.

Large-scale infrastructure projects under President Marcos’ “Build Better More” infrastructure development program, intended to spur economic growth, will be seriously undermined if corruption inflates project costs or delays their completion to the untold long-term prejudice of our people. 

Poorest in ASEAN

The Philippines remains the poorest country among the founding members of the Asean. Based on 2024 IMF data, our per capita income is only USD 12,190.00 compared to Indonesia at US$16,860.00, Thailand at $23,400.00 and Malaysia at $39,030.00. Singapore, a small country with practically no natural resources and good governance as its principal asset, has a per capita income of $D133,074.00, more than ten times our per capita income. Even ASEAN newcomer Vietnam has outpaced us at $15,400.00 and we are not far from being overtaken by Bangladesh. 

Moving forward

Public funds, whether sourced from taxes or loans, must be used transparently and responsibly. The Philippines cannot afford the mismanagement of public money, especially at a time when its debt is increasing at such a rapid pace. Strengthening institutions like the Commission of Audit, Office of the Ombudsman, our courts of law and reinforcing procurement procedures and oversight are essential steps in combatting corruption. 

Our ability to catch up with our peers in the region depends on ensuring that public funds, especially borrowed money for which we must pay interest (which otherwise can be used for essential projects and services), are used efficiently for their intended purposes. Fighting corruption is not just a legal or moral imperative. It is essential to eradicate poverty and ensure that the Philippines stays on a sustainable financial path for the sake of generations to come. – Rappler.com

The author is the senior legal counsel of ACCRLAW, chairperson of the justice reform initiative and a former president of the Philippine Stock Exchange, Financial Executives Institute of the Philippines, Management Association of the Philippines and the Shareholders’ Association of the Philippines. The views expressed in this column are exclusively his and should not be attributed to any institution he is associated with.

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