2005 budget deficit seen to be lower than expected

The country’s budget deficit is expected to come in 16 percent below the official target this year as an expansion of the country’s sales tax boosts the government’s coffers, an official said yesterday.

Assistant Finance Secretary Gil Beltran told reporters an inter-agency group tasked with reviewing the government’s economic forecasts had estimated 2005’s fiscal shortfall at P151.25 billion following last week’s approval by Congress of a bill expanding value-added tax (VAT).

The government has set a target budget deficit this year of P180 billion or 3.4 percent of gross domestic product (GDP), down from P187 billion, or 3.9 percent of GDP, in 2004.

"The emerging scenario is at P151.25 billion," Beltran said, adding that the inter-agency group had assumed minimum additional collections of P28.75 billion this year from the VAT.

The improved outlook came a day after officials said the government likely had a rare budget surplus in April as tax collection – long a weak point – hit a record high.

Beltran said the Development Budget Coordination Council (DBCC) already decided to use the entire proceeds to be raised from the new VAT law to scale down the country’s swelling budget deficit that has worried the country’s lenders and brought down the country’s credit ratings.

For the first quarter this year, the National Government’s budget deficit reached P63.5 billion which the DOF said is still within the government’s target ceiling of P77.8 billion for the period.

To cut the budget deficit, the government is pressing for new revenue measures to control the deficit and prevent a fiscal crisis.

At the same time, tax collection agencies are being pressured to beef up their collection efforts.

Under the original projection for the year, revenues raised by the Bureau of Internal Revenue (BIR), Bureau of Customs (BOC), Bureau of Treasury (BTR), among others is expected to grow close to 12 percent to P783.156 billion this year from P699.77 billion last year.

Revenue collections by the BIR is expected to increase 16.8 percent to P546.9 billion from P468.18 billion while that of BOC is expected to jump 23.44 percent to P151.18 billion from P122.47 billion.

On the other hand, government expenditures is expected to rise 8.6 percent to P963.15 billion this year from P886.82 billion last year

Earlier, the Senate and the House of Representatives have ratified the VAT bill approved by the bicameral conference committee that calls for the lifting of the VAT exemptions and the grant of standby authority to President Arroyo to increase the VAT rate to 12 percent from 10 percent next year.

The DOF said the country will have a balanced budget by 2008, or two years ahead of 2010 as earlier projected by the government.

The budget shortfall will be trimmed to P151 billion this year to P92 billion next year, to P55 billion in 2007, and to P6 billion in 2008.

The DOF added that the new Lateral Attrition Law as well as higher revenues will eliminate the P6 billion deficit in 2008.

The government is expected to achieve a budget surplus of P16 billion in 2009, marking the first time in 12 years that the country would be posting a surplus. The last time the Philippines posted a budget surplus of P1.6 billion was in 1997 under the Ramos administration.