FOUR weeks ago, I wrote about COVID-19 as being a formidable foe. This remains true to-day.
The Department of Health warns against talking in terms of the relationship between confirmed cases and time as being describable as ‘flattening the curve’.
As at Aug. 25, the tally of COVID-19 cases in the Philippines was 197,164 and fatalities were 3,038.
A month later, Sept. 25, the number of confirmed cases had jumped to 299,361 and the death toll was 5,196.
Thus, both the number of cases and the fatalities rose by almost 70 percent in the past month.
We are not flattening the curve.
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The economic impact of COVID-19 is, as we all know, horrendous.
Loss of tax revenue of all aspects is substantial, and the economy is contracting.
Necessary quarantining, which, by definition, means our mobility is decreasing, results in lower expenditure because we have less opportunities to spend. Those fortunate enough to obtain a similar income as in pre-COVID-19 days may enjoy an improvement in their financial circumstances.
The government is quick to recognize this and is seeking ways to obtain our savings by issuing bonds.
Last week, the Department of Finance announced that it will be holding a “premyo” bonds sale in November. This is a mega lucky draw from which the prizes are obtained from the notional interest (at what rate?) paid from bonds bought by small investors (you and me). With good marketing, this is likely to raise several billions of pesos.
Finance Secretary Carlos Dominguez said the prizes could serve as instruments in generating employment and in helping Filipinos bounce back from the pandemic.
We hope so.
Fairly recently, Benjamin Diokno, BSP head, had the same idea. He proposed that small investors make investments administered by financial experts so as to better prepare for their retirement.
For me, warning bells rang loudly when I heard about this. There are too many unscrupulous “spivs” who see the small investor as a financially illiterate dupe from whom excessive charges, fees, and commissions can be extracted.
Will BSP provide effective consumer protection?
We should be looking for investments where there is a low possibility of losses, even though we recognize that significant profits are also unlikely.
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The funds obtained from the sale of government bonds will comprise part of the government’s indebtedness. The pandemic is already causing the government to incur a higher debt to GDP (gross domestic product) to be higher.
Prudent financial governance over the past ten years has made our economy more resilient against the financial ravages of the pandemic than would have been the case if the government had been spendthrift.
The virus is tenacious, but so are we./PN
