February budget gap even higher as public spending accelerates

CLARK FIELD, Philippines—The national budget deficit in February is likely to be much bigger than the P16 billion in the previous month, the Department of Budget and Management (DBM) said as it reported an accelerated spending for infrastructure in a bid to reverse the economic slowdown last year.

The government has yet to release the official data on the government’s fiscal position in February, but the DBM said public spending significantly exceeded revenue collection during the month, thereby resulting in increased deficit, as bulk of the budget for infrastructure has already been released to the Department of Public Works and Highways (DPWH).

“We expect the budget deficit for February to be significantly bigger than P16 billion (the amount of the budget gap posted in January),” Budget Secretary Florencio Abad told reporters late Saturday during a forum held here and organized by the Economic Journalists Association of the Philippines.

Abad said the budget department had already released P150 billion to the DPWH for the various infrastructure projects lined up for the year. The amount represents 72 percent of the government’s total budget for capital outlay for 2012, he added.

Citing a report by the DPWH, Abad said close to 90 percent of all infrastructure projects have already been bid out, and most of those bid out are already covered by “notices to proceed.” Contractors that hold such notices are already paid 15 percent of the project cost to cover mobilization expenses.

“The era of underspending is now behind us,” Abad said.

Last year, the economy grew by 3.7 percent from the year before. Economists considered the rate decent, but it was a sharp deceleration from the 7.6 percent registered in 2010. Last year’s economic growth rate was also short of the government’s target of between 4.5 and 5.5 percent.

Not only the decline in export revenues—an offshoot of the crisis suffered by export markets led by the Eurozone—was blamed for the economic slowdown but also underspending. The national government spent much less than the programmed expenditure set for 2011.

Abad and other economic managers said the underspending was a result of efforts to scrutinize expenditure proposals of line agencies and to enhance system of budget allocation to minimize, if not totally eliminate, leakage from dishonesty and corruption.

The budget chief claimed that the budget process has already been significantly enhanced, and that the government is now prepared to pump-prime the economy without getting worried about potentially huge leakages from flawed budget-allocation system.

For the entire 2012, the government is allowing itself to post a budget deficit of P279 billion, hoping heightened spending will boost growth of the economy. The amount is bigger than the P198 billion registered last year, but the government claims it will still be within levels considered prudent in international standards.

Abad also said that in 2013, spending for public projects and programs will be even faster. He said the General Appropriations Act—which contains details of public spending for a given year—to be enacted by Congress for that year will already serve as the authority for government agencies to spend.

Details and breakdown of costs of government projects and programs for 2013 will be listed in the 2013 GAA. This is contrary to previous GAAs that contain very broad descriptions of project costs.

Under current practice, because details of project costs are not yet listed in the GAA, a government agency may only spend funds allocated for a specific project once it gets an authority to spend—a document released by the DBM following submission by the agency and approval by the DBM of details of project cost.