COVID-19 spending plus low collection equals 10,000 percent deficit jump from 2019 level
Spending on public goods and services more than doubled in April as the government tried to ease the pain inflicted on vulnerable sectors by the COVID-19 pandemic but with barely any revenue coming in, resulting in a P273.9 billion budget deficit, the biggest in a month to date.
The latest Bureau of the Treasury data released on Wednesday (May 26) showed last month’s deficit reversed the P86.9-billion surplus posted in 2019, as the month of April historically recorded surpluses owing to the mandatory April 15 deadline to file and pay income taxes.
April is normally the month when collection by the Bureau of Internal Revenue (BIR) surges.
But this year, the BIR had to extend the 2019 income tax return (ITR)-filing and payment deadline thrice before finally settling on a final deadline of June 14 as a result of the extension of stay-at-home orders which had been in place since middle of March.
As a result, the government’s tax and non-tax revenues declined 39.17 percent to P187.8 billion in April from P308.7 billion in 2019.
Non-tax revenues jumped 215.98 percent year-on-year to P62.8 billion as the national government ordered state-run corporations to remit dividends earlier than usual to finance COVID-19 response under the Bayanihan to Heal as One Act.
The GOCC remittances, however, was not enough to offset the nearly 60 percent drop in tax collection to P124.9 billion.
The BIR’s take slid 61.56 percent year-on-year to P90.5 billion, while the Bureau of Customs (BOC) collected P34.4 billion in import duties and other taxes, down 33.38 percent.
“The slower outturn was attributed to the Luzon-wide enhanced community quarantine, which was also implemented in other provinces, and the extension of deadlines for the filing and payment of income and other taxes due for the month amid the pandemic crisis,” the Treasury said.
Just as government pockets were being emptied, expenditures surged more than 100 percent to P461.7 billion last April from P221.8 billion in 2019.
So-called productive spending, or the amount spent net of interest payments on borrowings, grew by a faster 121.81 percent to P439.8 billion in April.
Spending was pushed by the release of funds for cash aids, small business wage subsidies and grants to local government units in the form of internal revenue allotment advances, according to the Treasury.
At the end of the first four months of 2020, the budget deficit swelled by 10,214.56 percent to P347.9 billion from only P3.4 billion as of end-April in 2020.
Total revenues from January to April declined 3.36 percent year-on-year to P963 billion, while four-month disbursements climbed 31.12 percent to P1.311 trillion.
Department of Budget and Management (DBM) projections showed the budget deficit will widen to P1.563 trillion or 8.1 percent of gross domestic product (GDP) this year, P1.429 trillion next year, and P1.181 trillion in 2022, from P660.2 billion last year.
In the near term, government spending will remain elevated to better respond to the uncertainty caused by the COVID-19 crisis, while revenues were expected to remain weak due to socioeconomic shocks.
To finance these huge budget deficits, the government will have to borrow more from multilateral lenders as well as issue bonds onshore and offshore despite a possible increase in borrowing costs because of “increased risk aversion of investors,” according to the report, “We Recover As One,” by the National Economic and Development Authority (Neda) last week.
The government must remain prudent and agencies should “realign expenditure priorities to facilitate the transition and adjustment to the ‘new normal,’” the report said.
Edited by TSB
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