Deficit posted despite ‘forced underspending’

The government’s budget balance reverted to a deficit in February despite continued delays in the passage of this year’s outlay.

The month’s P76.4-billion gap was a reversal of the P44.5-billion surplus posted in January, Treasury bureau data released on Friday showed. It was also wider than the P51.7-billion deficit recorded a year earlier.

Government revenues rose by 13 percent to P202.1 billion, from P178.5 billion last year, while expenditures grew by 21 percent to P278.5 billion from P230.2 billion. A month earlier, revenues rose by 7 percent while expenditures fell by 7 percent.

The latest deficit resulted in a year-to-date shortfall of P31.8 billion, 23 percent lower compared to the P41.5 billion posted in the comparable 2018 period.

Revenues up

For February alone, the Bureau of Internal Revenue (BIR) accounted for the bulk of revenues with P135.7 billion, 16 percent higher compared to the year-earlier P116.6 billion. The growth was faster compared to January’s 5 percent.

The Bureau of Customs (BoC) netted P44.2 billion — a 1-percent gain from last year’s P43.7 billion — while other offices contributed P2.7 billion, bringing total tax revenues for the month to P182.6 billion. Tax revenue growth was faster at 12 percent from the 8 percent a month earlier.

Non-tax earnings, meanwhile, totaled P19.5 billion with the Treasury contributing P9.2 billion — up 56 percent — “mainly due to the P4.0 billion dividend from the Bangko Sentral ng Pilipinas and P2.9 billion national government share in Pagcor (Philippine Amusement and Gaming Corp.) income.”

Other offices contributed P10.3 billion, 6 percent higher from last year.

Spending

The bulk of government spending or P253.2 billion was for primary expenditures, which rose by 24 percent from P204.1 billion a year ago.

The Treasury bureau said this was “due to payments of accounts payable by National Government Agencies and the release of January internal revenue allotment for local government units that slid to February.”

Interest payments of P25.3 billion, meanwhile, accounted for the rest of state spending. It dropped by 3 percent year-on-year “due to the coupon on bonds which matured in 2018.”

Netting out interest payments, the government recorded a P51.1-billion primary deficit in February, wider than the P25.6-billion shortfall posted last year.

Year to date, the primary balance hit a surplus of P39.4 billion, wider than last year’s P28.1 billion.

YTD tally

Reckoned from the start of 2019, revenues were up 10 percent year on year to P458.8 billion as of end-February.

The BIR’s two-month tally of P320.8 billion was 10 percent higher compared to a year earlier while the BoC’s year-to-date take of P92.6 billion was 9 percent better.

Primary expenditures rose 8 percent to P419.4 billion during the period while interest payments recorded 2 percent growth to P71.2 billion.

This resulted in lower-than-programmed state spending in the first two months of the year, the Finance department said in a statement.

January-February expenditures totalled P490.7 billion, 7 percent higher than a year ago but P43.7 billion less than estimated programmed funds of P534.4 billion.

In a statement, the Finance department said this was equivalent to P740.7 million in available funds that the government was not able to utilize per day because of the delay in the implementation of the 2019 national budget.

‘Forced underspending’

The government has been operating on last year’s P3.767-trillion budget since the start of the year. This means agencies can only spend for items detailed in the 2018 outlay and cannot embark on programs and projects supposed to be implemented this year.

“The No. 1 casualty of this forced under-spending is President [Rodrigo] Duterte’s signature ‘Build Build Build’ program,” Finance Assistant Secretary Antonio Lambino 2nd said.

“[I]t has barred the government from frontloading investments in big-ticket infrastructure projects during the best time of the year to do construction, and for projects that have the highest multiplier effect on the domestic economy,” he added.

Earlier this week, Senate President Vicente Sotto 3rd ended the budget impasse by signing the 2019 General Appropriations Act. However, he signed the document with “strong reservations” given the Senate’s claims that the House of Representatives made post-bicameral conference committee changes.

The National Economic and Development Authority has warned that Philippine economic growth could decelerate sharply to 4.2-4.9 percent under a full-year reenacted budget.

Economic managers have also cut their growth targets for 2019 and 2020, citing the reenacted budget, an ongoing El Niño and the US-China trade war.

The interagency Development Budget Coordination Committee is now aiming for 6.0-7.0 percent growth this year and 6.7-7.5 percent next year, down from 7.0-8.0 percent previously.

Apprehensions validated

“Given that it would take weeks for Malacañang to review the Congress-submitted GAB (General Appropriations Bill), for the President to sign it, and for the concerned agencies to implement their respective projects, we can expect the 2019 GAA to be fully on stream on or before the middle of this year yet,” Lambino said.

ING Bank Manila senior economist Nicholas Antonio Mapa stressed that the latest budget balance data “validates government officials’ initial apprehensions about the budget delay.”

“Budget delayed is growth denied. Hopefully the GAB can be signed to get government spending back on track but it may be difficult to ‘catch up’ given they’ll be attempting to spend funds allotted for 12 months in only seven months time,” he added.

https://www.manilatimes.net/deficit-posted-despite-forced-underspending/532779/