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By Maricel E. Burgonio, Senior Reporter
THE Arroyo administration’s budget deficit ballooned by more than
500 percent in the first five months of the year, as the government
spent more than it earned during the period to stave off a
recession.
In a briefing, Finance Secretary Margarito Teves
said the government’s expenditures outpaced its revenues by P11.4
billion last month, a reversal from the P7-billion surplus in the
same month last year.
The May performance caused the fiscal gap to
widen to P123.2 billion in the first five months of the year, from
P18.8 billion last year.
Teves said the higher deficit was largely due to
the global economic slowdown, which led to fewer revenues while
forcing government to spend more to stimulate the economy.
He said government spending rose 16 percent from
a year earlier to P115.6 billion in May, and to P579.1 billion for
the first five months.
However, revenues declined 2.5 percent to P104.2
billion for May and by 5.4 percent to P456.2 billion in the first
five months.
Teves said the government would “continue with
our spending on health care, services, infrastructure.”
Benjamin Diokno, Budget secretary during the
Estrada administration, however, said, “The fiscal numbers suggest
weaknesses in both revenues and expenditures. The likely scenario is
that the revised budget deficit target of P250 billion would be
met—but only if the present poor performance would not deteriorate
further and the current 2009 spending plan is maintained.”
“If revenue performance deteriorates
further—say 10-percent lower than 2008 levels—the likely deficit
would be around P308 billion. This assumes no further cut in
spending program,” Diokno said, adding that “[i]t would be a
monumental folly to cut spending on important public infrastructure
and social protection programs at this stage of the economic
downturn.”
Disappearing primary surplus
The University of the Philippines economics
professor also raised concerns about “the disappearing primary
surplus,” which refers to revenues less expenditures net of
interest payments.
“The primary surplus gives some indication of
the government’s ability to service its debt. From January to May
2009, the primary surplus was only P10.8 billion compared with
interest payments of P133.8 billion for the same period. This means
the Philippine government has to borrow P123 billion just to pay for
its interest payments from January to May,” Diokno said.
“A nation is on a slippery slope of fiscal
disaster when it has to borrow money to pay for the interest costs
of its existing debt,” he added.
Teves, however, expressed confidence that “the
government will meet its [budget deficit] program,” with domestic
and foreign borrowing likely this year to bridge the budget gap and
raise the funds required for stimulus spending.
If it had not been for the global financial
crisis, “we would have maintained our target deficit for the year
at about P40 billion,” he said.
The country’s economic managers recently
raised the government’s deficit ceiling to 3.2 percent of the
gross domestic product (GDP), from an earlier program of P199
billion or 2.5 percent of GDP.
The adjustment came after Philippine GDP growth
fell sharply to 0.4 percent in the first quarter this year, from 3.9
percent last year. This forced authorities to cut their target for a
third time to between 0.8 percent and 1.8 percent this year, from an
earlier estimate of 3.1 percent to 4.1 percent.
An indicator of economic performance, GDP
measures the amount of final goods and services produced in a
country. The deficit-to-GDP ratio in turn is a key measure of how
long a government can sustain revenue shortfalls.
Last week, the Philippines signed an agreement
in Tokyo, in which the Japan Bank for International Cooperation
would guarantee 95 percent of up to $1 billion in yen-denominated
“Samurai bonds” to be issued by Manila.
Open to issuing
global bonds
“We’re still open to issuing global
bonds,” Teves added but stressed that most of the government’s
borrowing would be from domestic sources.
National Treasurer Roberto Tan, however, said
the government has deferred a plan to sell retail Treasury bonds (RTBs).
At an auction of 10-year Treasury bonds, the
government managed to raise the full P8.5 billion offered on
Tuesday, with the yield on the debt paper rising to eight percent
from 7.927 percent when the IOUs were last issued on April 28.
The government resorts to borrowing to plug its
fiscal gap when tax agencies fail to hit collection targets.
At end-May, the Bureau of Internal Revenue (BIR),
which accounts for about 70 percent of state revenues, suffered a
6.1-percent year-on-year drop in collections at P315.2 billion.
The Bureau of Custom also saw its revenues drop
8.3 percent to P84.5 billion.
-- With AFP
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