Consolidated public sector deficit seen at P203.865 billion this year

The country’s consolidated public sector deficit (CPSD) is expected to go down to P203.865 billion for the whole of 2005 from P263.217 billion in 2004 as the Arroyo administration anticipated the impact of its revenue measures.

Data from the Department of Finance (DOF) showed that the consolidated public sector financial position would be better than expected in 2005 and the deficit would be less than originally projected.

In 2004, the CPSD was 5.4 percent of gross domestic product (GDP), with the total public sector borrowing requirement (PSBR) reaching P295.449 billion.

This year, the DOF originally estimated that the CPSD would reach P253.632 billion equivalent to 4.8 percent of GDP and the PSBR would reach P294.764 billion.

According to the DOF, however, the revised estimates indicated that CPSD this year would be only P203.865 billion equivalent to 3.8 percent of GDP and the PSBR would reach only P240.878 billion or 4.5 percent of GDP.

The revised CPSD estimate was based on the revised 2005 deficit target of P180 billion but the DOF also made two serious assumptions: that it would collect additional revenues from administrative measures already in place and legislative measures will be passed in 2005.

The DOF also included in its projection partial proceeds from the privatization of some assets of the Power Sector Assets and Liabilities Management Corp. (PSALM) and further assumed proceeds from the increase in power rates of the National Power Corp. (Napocor).

The returns from the restructuring of the power sector, however, were also expected to be offset by a corresponding increase in the capital expenditures of some government owned and controlled corporations.

The revised CPSD estimates were based on projected revenues of P783 billion and expenditures of up to P963 billion.

The Arroyo administration had opted for a more aggressive deficit reduction program, revising its 2005 deficit target from P184 billion to P180 billion even with the additional debt burden absorbed from the Napocor.

The Development Budget Coordinating Committee (DBCC) said the new 2005 fiscal targets were based on the adjustments from the incremental revenues that government expected to get from the new excise taxes on cigarettes and alcohol.

At this level, the deficit would be equivalent to 3.5 percent of GDP, lower than the original target of P184 billion which would have been around 3.6 percent of GDP.

The CPSD represented the consolidated deficit of the national government and all government-owned and controlled corporations (GOCCs) whose budgets are funded by the general appropriations act.

The DBCC said the adjustment already incorporated some P18.1 billion additional interest payments as the National Government assumed P200 billion of the debts of the Napocor.

The DBCC also set its quarterly deficit targets for 2005 at P77.8 billion for the first quarter, P98.5 billion for the first semester of the year and P145.9 billion for the three quarters and finally to P180 billion by the end of the year.

"The revenue projection for the year already incorporates the impact of the implementation of the sin tax law, the 2 percent tariff on petroleum imports and some administrative measures," the DBCC said.

According to the DBCC, expenditures net of debt servicing would track 2004 levels, with interest payments frontloaded during the first part of the year.

At some point, the DBCC even considered bringing the 2005 deficit target down to a more aggressive P177 billion but the failure of Congress to pass the critical increase in the value added tax would prevent the Arroyo administration from generating the necessary revenues on time.