Infrastructure spending up 15.4% in 2017

The amount spent by the government to build infrastructure in 2017 reached P568.8 billion, exceeding the program as more projects were rolled out towards the end of the year, the latest Department of Budget and Management data released Wednesday showed.

The shift to an annual cash-based budget in 2019 from the multi-year obligations-based system at present would further reduce underspending, which has been on a decline in the past two years, said Budget Secretary Benjamin E. Diokno said during a press conference.

Last year’s disbursements on infrastructure and other capital outlays surpassed by 3.5 percent the programmed amount of P549.4 billion, DBM data showed.

Diokno said they were able to exceed the program as there were many projects left behind by the previous administration, which they continued to implement.

They “did not go beyond” the budget anyway, Diokno said, as the government underspent on other expenditures such as personnel services, maintenance and other operating expenses, allotment to local government units, interest payments, tax expenditures, and capital transfers to local governments.

Infrastructure spending last year also rose 15.4 percent from P493 billion in 2016.

Higher disbursements

In a report, the DBM attributed the higher disbursements on infrastructure and other capital outlays in 2017 to “the implementation of road infrastructure projects (of the Department of Public Works and Highways), projects under the Armed Forces of the Philippines Modernization Program (of the Department of National Defense), Capability Enhancement Program (of the Department of the Interior and Local Government-Philippine National Police), and other capital outlay projects such as repair and rehabilitation of school facilities (of the Department of Education/state universities and colleges).”

In December alone, the amount spent on infrastructure rose 23 percent year-on-year as well as jumped 87.8 percent month-on-month to P82.3 billion, DBM data showed.

“This covers road infrastructure projects such as construction, improvements of roads and replacement of bridges in Luzon, Central Visayas and Mindanao; flood control projects and rehabilitation of dike and river basins in Pangasinan, Central Luzon (Pampanga and Nueva Ecija), and National Capital Region (Marikina, Valenzuela and Quezon City); and projects from the AFP Modernization Program, namely acquisition of munitions and purchase of engineering and information and communications technology equipment,” the DBM said.

Diokno said the share of infrastructure spending to gross domestic product last year was about 5.6 percent, higher than the target of 5.4 percent.

He expressed optimism that this year’s 6.1-percent infrastructure spending-to-GDP goal is attainable.

Underspending

Total national government expenditures in 2017 reached P2.824 trillion, 2.9-percent below the P2.909-trillion program, although up 10.8 percent from P2.549 trillion in 2016.

“Underspending, defined as the deviation of actual from programmed disbursements, has been cut down to 2 percent if interest payments were excluded and 3 percent if included. Why exclude interest payments? Because lower interest payments is not necessarily bad,” Diokno said.

“The lower underspending rate is a result of what we started last year which is to shorten the validity of appropriations to one year. Because of this, agencies are compelled to expedite the implementation of their projects and programs. They were also required to include only projects that are shovel-ready,” Diokno added.

“This is a remarkable feat given the size of our budget and issues of underspending in the past. The government’s role in promoting growth with equity will only be enhanced given the timely use of public funds,” according to Diokno.

The Budget chief pointed out that underspending in 2014 and 2015 hit highs of 13.3 percent and 12.8 percent, respectively.

In 2016, the government underspent 3.6 percent of the revised fiscal program, but under the original assumptions for that year’s budget, underspending would have reached 14.9 percent, Diokno said.

Disbursement performance

“The fiscal program was adjusted with the transition in government and as the new members of the Development Budget Coordination Committee evaluated the midyear performance of government disbursements in 2016. But viewed in this perspective, it makes the disbursement performance for 2017 all the more impressive,” according to Diokno.

For Diokno, the shift to cash-based budgeting next year would further minimize underspending as it would promote a “culture of fiscal responsibility.”

Under the new system, “agencies will no longer submit projects to the DBM that are not yet implementation-ready,” Diokno explained.

“Annual cash-based budgeting, as opposed to multi-year obligations-based budgeting, limits incurring obligations and disbursing payments for goods delivered and services rendered, inspected, and accepted within the fiscal year — meaning, the extent of budget implementation is just one year, with an extended payment period of three months after the fiscal year,” the DBM explained.

“Shifting to annual cash-based budgeting is expected to speed up the government’s budget utilization and promote disciplined management of the budget. Also, as it shows disbursements rather than obligations or commitments, a cash-based budget tends to reflect more accurately the annual outputs and actions of the government,” the DBM said.

“The shift to annual cash-based budgeting is especially significant in the context of the Duterte administration’s expansionary fiscal policy, where spending for social services and infrastructure is intended to increase significantly,” according to the DBM. /lb