THE GOVERNMENT should take a longer view on planning its finances to promote transparency and assure investors of the continuity of projects, the International Monetary Fund (IMF) said.
In a new report, the IMF also urged Congress to push for vital reforms that would, among others, provide clearer rules in the state’s budgeting process, particularly in the use of politicized, lumped slush funds.
“Planning and costing of projects hasn’t been strong, especially for multi-year projects. Clearly the planning and costing could be improved,” IMF Resident Representative for the Philippines Shanaka Jayaneth Peiris said Thursday.
He said that for the most part, the Philippines had made significant strides in the last four years in improving its budgeting process, which was now more transparent as it had ever been in history.
The IMF’s first ever Fiscal Transparency report on the Philippines showed the government was classified as either “advanced” or “good” in 23 out of 36 categories tracked by the multilateral lender. The Philippines earned a grade of “basic” (met minimum requirements) in eight categories, but failed in four.
Among the country’s strongest areas were in the frequency of reports on disbursements and collections during the year, public participation, and environmental risks.
The government failed in its analysis of long-term fiscal sustainability. This refers to government projections on how much debt it will have to accrue to meet spending plans over the long term.
Peiris said this weakness was a result of weaknesses in the government procurement process. Many agencies remain ill-equipped to bid out projects in line with best practices. This also makes planning for projects—larger ones in particular—more difficult.
The government’s assessment of risks linked to guarantees was also found lacking. Under the law, all public debt is guaranteed by the government. It’s unclear, however, whether implicit guarantees such as unforeseen costs in public-private partnership (PPP) project are also backed by the state.
He said addressing this issue should be made a priority, given the expected role that PPPs would play in the future of the country’s infrastructure development.
The official said the government also needed clearer rules on the reallocation of funds. In the past, large portions of the government’s annual budget were usually tagged as un-programmed cash. These lump-sum amounts, covered by few rules, are spent at the behest of officials.