End-July budget gap narrows as gov’t continues to underspend

The national government posted an end-July budget deficit of P761 billion, lower by almost a tenth than year-ago level and more than a fourth smaller than the seven-month program as revenue collections exceeded targets while agencies continued to underspend.

Citing the latest Bureau of the Treasury (BTr) data, Finance Secretary Benjamin Diokno told the House committee on appropriations Friday that the fiscal deficit in the first seven months was 9.1 percent narrower than the P837.3 billion recorded a year ago. It was also 26.6 percent smaller than the P1.04-trillion deficit program for January to July.

While end-July expenditures rose 8.3 percent year-on-year to P2.79 trillion, actual spending on public goods and services were 5.5 percent below the P2.96-trillion program.

In particular, productive spending net of interest payments grew 7.4 percent year-on-year to P2.49 trillion, but the amount was 5.8 percent lower than the P2.64 trillion that should have been spent during the first seven months.

Interest payments also increased 15.6 percent year-on-year to P309.3 billion as of July, although actual expenditures were 2.6 percent smaller than the P317.7 billion set aside to pay interest slapped on borrowings.

In July alone, the BTr said in a statement that interest payments dropped 11.8 percent to P52.1 billion from P59 billion a year ago “due in part to the level effect of the timing of coupon payments for global bonds recorded in July last year as it originally fell on a weekend (Aug. 1, 2021).” As such, the BTr said the government saved P10.1 billion in interest payments to date.

Diokno blamed the lag in spending to the ban on public disbursements before the May 9 elections. Government agencies were urged to catch up on their programmed expenditures in the second half of the year.

Diokno told legislators tackling the proposed P5.268-trillion 2023 national budget that historically, actual spending fell behind the national government’s spending plans.

“That’s the reason why our actual deficit is much smaller than the forecast,” Diokno said.

In the meantime, end-July tax and non-tax revenues rose 16.6 percent year-on-year to P2.04 trillion, exceeding the P1.92-trillion collection target by 5.9 percent.

Diokno said revenue collections thus far were “overperforming.” The Bureau of Internal Revenue (BIR), for instance, grew its tax take by 10.6 percent year-on-year to P1.33 trillion, although it was 2.7 percent below the P1.37-trillion seven-month goal.

The Bureau of Customs (BOC) not only hiked its collection of import duties and other taxes by 33.8 percent year-on-year to P480.3 billion as of end-July, but also surpassed its P421.4-billion target by 14 percent. The BOC’s July collection of P83.6 billion was its highest-ever monthly take and this was attributed to “improved valuation, digitized and modernized systems, and the gradual reopening of the economy that resulted in higher import volume.”

President Marcos’ economic team had tasked the BIR to collect P2.39 trillion in taxes this year, while the BOC’s collection target was set at P721.5 billion.

In July, alone, the national government posted an P86.8-billion budget deficit, 28.4 percent narrower than the P121.2 billion a year ago.

July expenditures rose 4.8 percent year-on-year to P395.4 billion, including a 7.9-percent increase in productive spending to P343.3 billion. Total revenue in July grew 20.5 percent year-on-year to P308.6 billion.

The government had programmed a P1.65-trillion full-year budget deficit for 2022, equivalent to 7.6 percent of gross domestic product (GDP), which will be lower than last year’s P1.67-trillion gap or 8.6 percent of GDP. For 2023, the gap was projected to further taper to P1.45 trillion or 6.1 percent of GDP, en route to reaching the pre-pandemic fiscal-deficit levels equivalent to 3 percent of GDP by 2028.