Yearender: Government to step up spending in 2012

MANILA, Philippines – The “problem” the government wants to have more than anything now is a wider budget deficit.

It’s ironic because for years, the government has been trying to narrow the budget gap and the previous administration even attempted to balance the budget by 2010 supposedly.

This administration, however, faces the problem of underspending which has been blamed for the lackluster economic growth.

On the fiscal side, the year 2011 has been marked mainly by fiscal authorities’ struggle to boost spending.

However, while revenues improved and the government’s debt liability management efforts paid off, state spending remains weak.

As such, analysts believe that the government’s budget gap ceiling of P300 billion for the year and even the revised budget deficit projection of P260 billion would be difficult to meet – a clear reflection of a huge dearth in state spending.

According to the latest fiscal report, the January to November budget gap stood at only P96.254 billion, significantly lower than the P267.328 billion deficit incurred in the same period last year.

In November alone, the budget gap was at P22.003 billion, reversing a surplus of P482 million in the same period last year.

Revenue collections as of end-November reached P1.249 trillion, growing by 13.13 percent from last year’s P1.104 trillion.

Revenues improved but spending needs to step up.

Of the amount, the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC) registered a growth of 13 percent and four percent, respectively.

The BIR collected P849.515 billion as of end November while the BOC has so far generated P242.960 billion during the 11-month period.

The income of the Bureau of the Treasury was recorded at P75.021 billion while other offices registered an income of P82.276 billion.

In November alone, revenue collections reached P128.745 billion, of which, the BIR collected P92.751 billion and P25.510 billion for BOC. Bureau of the Treasury income and collections from other offices for the month were recorded at P3.828 billion and P6.656 billion, respectively.

In terms of expenditures, the government continues to lag behind targets.

For January to November 2011, total disbursements amounted to P1.346 trillion which is two percent lower than the comparable disbursements in 2010.

Excluding interest payments, total disbursements decreased by 0.47 percent.

In November alone, actual disbursements amounted to P150.748 billion, above the P111.053 billion generated in the same period last year.

Finance Secretary Cesar Purisima said the government’s fiscal position reflects its ability to boost revenues and expenditures.

“Our November fiscal position has shown our ability to sustain increased expenditures with improved revenue collections. This only shows that we can keep up with our fiscal consolidation processes despite spending more to shield our economy from the present global uncertainties,” Purisima said.

However, the January to November fiscal position of P96.254 billion is way below the budget gap ceiling of P300 billion which clearly reflects the government’s inability to spend as it had programmed.

Even the revised budget ceiling assumption of P260 billion for the year would be difficult to attain, analysts said.

Private analysts forecast a yearend budget ceiling for the government of only P115 billion.

For instance, economist Victor Abola of the University of Asia & the Pacific said in a yearend economic briefing that the government’s budget deficit this year may hit only P180 billion.

Abola cited the government’s underspending in the first nine months of the year as the main culprit for a narrower-than-expected budget deficit.

But Budget and Management Secretary Florencio Abad insists that spending has improved significantly.

He said that government departments and agencies have effectively disbursed a total of P150.7 billion for the month of November.

This disbursement level, he said, marks the highest year-on-year growth of 35.7 percent for 2011, which he said is a marked improvement from the single-digit growth rate of P111.1 billion in November 2010.

“Aside from posting the highest growth this year, this is also the first time that our actual expenses surpassed programmed expenditures of P148.7 billion, showing a vigorous upswing of P2 billion,” he also said.

Still, it is still a long way to go in meeting the deficit-ceiling target.

With only a few days left in December, it is clear now that the government’s budget gap by the end of the year would definitely fall below the ceiling set for the year.

In the area of debt liability management, the government has maximized market opportunities this year with the issuance of peso-denominated global bonds.

The issuance of peso denominated global bonds is part of the government’s debt liability efforts.

Government believes that redenominating its debt into local currency would cushion the economy from foreign exchange fluctuation.

In January, the Philippines raised $1.25 billion from the sale of peso-denominated bonds and another $1.5 billion from a global bond sale in March.

In October, the government also launched a buy back offer for at least $1.5 billion of outstanding euro and dollar-denominated bonds.

The buy-back was meant to convert the government’s dollar debt into peso as part of its debt liability management efforts.

The Aquino administration said that with the early passage of the P1.816 trillion-budget for 2012, next year would be better in terms of spending.Whether or not spending improves significantly is still anybody’s guess. –Iris C. Gonzales (The Philippine Star)