Jan-Feb budget deficit hits P40.1B

The Philippines said yesterday it was on track to meet its first quarter budget deficit target but analysts said data for January and February highlighted the need for tax reforms that are bogged down in Congress.

The budget deficit in the first two months of the year hit P40.1 billion, 16 percent higher than the P34.57 billion in the same period last year.

The two-month deficit was around half the government’s deficit target of P77.8 billion for the first quarter of the year, the Department of Finance (DOF) reported yesterday.

The budget deficit in February stood at P23.5 billion, up 27.4 percent from February last year’s P18.45 billion.

The DOF said that revenues for the first two months of the year reached P113.149 billion, up from only P97.744 billion in 2004.

The DOF said that at this level, the January to February revenue was 69.27 percent of the P163.343-billion revenue collection programmed for the first quarter of the year.

On the other hand, expenditures reached P153.202 billion, about 63.53 percent of the programmed expenditures for the quarter. The January to February expenditures was significantly bigger than the P132.311 billion spent over the same period last year.

The bulk of expenditures, according to the DOF, went to interest payments amounting P56.862 billion. The programmed amount for the quarter was P91.549 billion.

However, the DOF report released to the media accounted for only P92.774 billion of total expenditures, with about P70.428 billion not reflected in the breakdown of expenditures.

The DOF said financing for the first two months of the year was largely sourced from foreign borrowings amounting to P69.2 billion, with the issuance of some $1.5 billion worth of global bonds due on 2030. Net domestic borrowings amounted to only P30.5 billion.

The Department of Budget Management said it expected debt service costs to increase in the coming months as the national government starts paying for NPC’s debts.

On the other hand, Purisima said the increase in revenue collections in was a result of improvements in the collection of the Bureau of Internal Revenues and the Bureau of Customs.

According to Purisima, the growth in BIR collections came from the continued rise in percentage taxes from banks and financial institutions resulting from the shift in the mode of taxation from value-added tax to gross receipts tax.

The national deficit was programmed to reach only P180-billion this year, about P4 billion more aggressive than the original P184.5 billion target set in 2004.

The DBCC has been pushing the numbers since last September before coming to the decision to lower the ceiling based on the revised revenue estimates following the adjustment in excise taxes on alcohol and tobacco.

The DBCC set its projected revenues for 2005 at P783.2 billion, up from the original target of P730.515 billion. On the other hand, expenditures were expected to reach P963.2 billion, up from P915.041 billion.

As a percentage of gross domestic product (GDP), the DBCC said the revised 2005 deficit target was equivalent to 3.4 percent, lower than the original target of 3.6 percent.

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 National Power Corporation.