Given low Philippine tax etfort, deficit spending is critical to mobilizing resources to realize human rights. ln the standard approach to public finance, deficit spending imposes high costs on the economy. A high public debt stock eventually forces the government to raise taxes and devote an increasing proportion of revenues to interest payments. As debt grows, creditors demand a higher interest rate, which discourages investment and raises the risk of debt default. Borrowing from the central bank generates inflation and leads to a devaluation of the peso. The emphasis on borrowing risks has instilled a strong bias against deficit spending. The bias against deficit spending is evident in recent episodes of fiscal consolidation (20032008, 2O1O-2O11), resulting in cutbacks in essential health, education and services along with underinvestment in critical infrastructures with adverse consequences on human rights. The Philippine Development Plan 2011-1016 continues on the same path of fiscal stability defined by low deficits. lt defines the task of fiscal policy as 'one of achieving fiscal consolidation, while at the same time substantially increasing the country's investments in infrastructure.' The first year of implementation reveals a strategy of achieving fiscal consolidation while paying lip service to raising investment levels. The HRBA to public finance framework adopts key human rights principles to deficit spending and the public debt, in pafticular, the primacy of human rights, the obligation to use the maximum available resources, and avoidance of retrogressive measures. Primacy of human rights. Applied to public finance, the principle of the primacy of human rights means that the human condition forms the basis of all fiscal action. Fiscal actions should be judged ultimately on their impact on the human condition and the realization of human rights. They should be judged on their effects on the economy through which they affect welfare and human rights-not on how they measure up to some preconceived notions of what is "sound" or "sustainable". Yet fiscal policy is conducted on the basis of a few rules of thumb (the deficit should not exceed 2o/o of GDP, public debt must be kept below 60% of GDP) rather than on concrete analysis of its effects on the economy under prevailing conditions. Deficit spending is justified when there are unemployed labor and material resources and human rights remain unfulfilled, while a budget surplus is called for when the economy is at full employment and the risk of inflation is high. To finance the deficit, the government may borrow from the private sector if it deems the interest rate too low, or it may borrow from the central bank if the interest rate is too high relative to a target rate. (The latter is legally prohibited but is easily circumvented.) There is nothing intrinsically bad about a deficit and a surplus is not necessarily good. Nor is there anything particularly worrisome about a high public debt stock denominated in pesos. Whether one is good or bad depends on the state of the economy. Current fiscal policy is governed by the fear of inflation and devaluation due to the deficit. The risk of devaluation as a result of large fiscal deficits is justified in principle, but should not be a matter of concern now and in foreseeable future given the country's huge and growing foreign exchange reserves. Fiscal deficits can lead to inflation when the economy is at full employment or "bottlenecks" in of the economy impose an output constraint. lndeed, inflation at full employment is the true limit to government spending, not some self-imposed rules of thumb. But the Philippine economy is far from achieving full employment, ln the face of sector-specific bottlenecks the proper policy response is to encourage investments by lowering the interest rate or by financing public investments focused on removing those constraints. certain sectors