These soft cuts in public expenditure, along with the plan to have a reserve of about P40 billion, will mean government will forego badly-needed pump-priming activities required to keep the economy afloat, especially with the absence of foreign investors.
"Pump-priming is not something that we can do," Medalla said, adding the government "is serious in reining in the deficit," which will continue to be its focus for the year.
Medalla said with certainty that with several measures meant to reduce the budget deficit, this year’s shortfall is not likely to exceed last year’s estimated shortfall of between P135 billion to P140 billion.
"We want to keep the deficit below P130 billion this year and we are perfectly capable of keeping it below that level," he said.
To achieve this, Medalla said government’s immediate belt-tightening measures include a spending program in the first semester that assumes a worst-case scenario wherein some P40 billion will be kept aside as a reserve.
Medalla said the reserve money will only be released if government’s revenue collection efforts, particularly from the Bureau of Internal Revenue and the Bureau of Customs are successful.
He said concerned government agencies will be meeting soon to discuss what areas or projects will have to take the cut.
The P40-billion reserve money, according to Medalla will mean taking out various components of the budget such as maintenance and operating expenses, as well as trimming special purpose funds.
Medalla said the proposed P40-billion reserve will be on top of a P10-billion cut in this year’s budget. There are still talks between the House of Representatives and the Executive on the possibility of further cuts to improve the country’s fiscal position.
The government overshot its targeted budget deficit for last year which was originally pegged at P62.5 billion, and the final deficit is seen to reach close to P140 billion.
Medalla said the deficit was a result of higher interests rates, higher foreign exchange rated and contingent liabilities of the government. – Rocel Felix