Wider fiscal gap prompts govt to hike borrowing

MANILA, Philippines - Manila will borrow more until 2010 to plug a wider fiscal gap resulting from lower revenues and higher public spending. This was announced by the Development Budget Coordinating Committee (DBCC), an interagency body that sets government’s revenue goals and economic assumptions, among others. As a result, instead of P442 billion, the Philippines will borrow P463 billion, or an additional P21 billion more from domestic sources, officials said. The borrowing program’s upward revision “already took into account the expected slowdown in revenues," Department of Budget and Management undersecretary Laura Pascua said. "The DBCC needed to strike the balance between increasing public spending to support growth without blowing up the national budget," she told reporters. The additional P21 billion could be sourced from domestic savings “which is already high," Finance undersecretary Gil Beltran said. “A lot of savings that could be tapped," Beltran said. This year, the DBCC raised anew the programmed budget deficit to P199.2 billion, equivalent to 2.5 percent of the country’s gross domestic product (GDP). This is 12.42 percent higher than the P177.2 billion anticipated for this year. As a result, the Arroyo administration will be unable to leave a balanced budget before her term ends on 2010. During that year, the budget deficit may reach P173.3 billion, two percent of the GDP. Earlier, the country's economic managers projected that a fiscal gap of P132.1 billion for 2010. The latest assumptions, especially the 2010 projections, will be reviewed again by the DBCC next month and possibly changed as conditions remain volatile, Pascua said. This is the fourth time the government revised upwards its budget deficit ceiling after abandoning its plan to balance the budget last year due to adverse external developments. The government expected the deficit to hit P40 billion or 0.5 percent of GDP but was later raised to P102 billion or 1.2 percent of GDP. Next: Deficit remains “manageable," finance official says Deficit remains “manageable," finance official says For his part, Finance undersecretary Gil Beltran said that higher budget deficit remains “manageable." “Our deficit is still smaller compared to other countries," he added. Expenditures are expected to increase by P16 billion to P1.495 trillion instead of P1.479 trillion to pump prime the sluggish economy. The DBCC downscaled growth targets anew, predicting that the economy will grow between 3.1 and 4.1 percent this year and between 4.3 percent to 5.3 percent in 2010 due to deepening global recession. Similarly, the government also cut its collection goal this year to P1.295 trillion from the previous target of P1.3 trillion. The Bureau of Internal Revenue will collect 1.73 percent less at P850.6 billion this year than P865.6 billion earlier targeted although the Bureau of Customs still has to generate P277.2 billion. However, non-tax revenues were increased by P7.8 billion particularly revenues from the royalty payments of the proponents of the $4.5 billion Malampaya natural gas project. “It (revision of revenue targets) is inevitable because of the change in the macroeconomic assumptions," Pascua said. The DBCC is now looking at a worst case scenario for exports, which will likely contract between 13 percent and 15 percent this year instead of just between six percent and eight percent. However, imports will likely fare better between 12 percent and 14 percent than eight percent to 10 percent previously forecast. Inflation, or the rise in prices of goods and services, will ease between 2.5 percent and 4.5 percent from previous expectation of three percent to five percent. The peso is seen to weaken against the greenback as the DBCC sees the exchange rate at P46 to P49 per dollar from P45 to P48 per dollar. - GMANews.TV