Taming budget deficit is ‘acid test’ for RP

Taming the Philippines’ growing budget deficit is the "acid test" for the government of President Gloria Arroyo, the Asian Development Bank (ADB) said yesterday.

"In a very real sense, that performance indicator has become an acid test," said Thomas Crouch, the ADB’s country director for the Philippines told reporters.

Crouch conceded that some ADB loans to the Philippines scheduled for this year had been deferred to next year because Manila could not come up with the required matching funds due to the budget crunch.

The Philippines revealed last month that the budget deficit for the nine months to September hit P166.47 billion, exceeding official projections by 57 percent.

The figure also exceeds the P130-billion budget deficit target for the whole of 2002.

Crouch would not say how much in loans had been deferred but remarked that "we have adjusted our program so the demands on the budget would not further stress the fiscal situation that the government faces."

The ADB requires the Philippines to shoulder about 40 percent of project costs, Crouch explained in a briefing at the ADB headquarters in the Philippine capital.

The Arroyo government understands the problem, Crouch said, adding "we all know it is a weaker situation than all of us would like to see."

He added that the budget deficit was "the only macroeconomic indicator that is out of step," with ADB projections.

"We believe there is no question of the government’s recognition of the need to address the problem," he said.

The deficit has risen due to low revenue collections amid resistance by some government agencies to the Arroyo government’s reforms, officials say.

Crouch said the Philippines had basically lost a year in its effort to have a balanced budget by 2006 but that it was still achievable.

"Now, it is not a question of reducing the deficit but a question of holding the deficit and not allowing it to expand further," he added.

The ADB earlier announced that it plans to lend $815 million to the Philippines from 2003-2005 under its new country strategy. – AFP