After the efforts to unburden the National Power Corp. (NPC), the IMF said the National Government should avoid taking on more fiscal burden from other government corporations.
The IMF has just concluded its annual Article IV review of the Philippines, one of its two annual visits where Fund officials discuss the progress of the government’s economic agenda.
IMF mission head Masahiko Takeda said the Fund was largely satisfied with the progress of the fiscal consolidation program of the government but said additional fiscal measures were still needed to ensure that it would achieve the medium term plan to balance the budget.
According to Takeda, the value-added tax rate should be increased as scheduled, adding that government should also sustain its "courageous campaign" being waged against tax evaders.
Moreover, the IMF warned that the government could be blind-sided by other parts of the public sector that could cause future problems if not closely monitored.
According to Takeda, government owned and controlled corporations (GOCCs) should be watched closely to avoid shifting the burden of fiscal adjustments disproportionately onto the national government.
Takeda said that steps have been taken to arrest the financial hemorrhage of the NPC but said the bigger question now was how to keep the deficit from worsening all over again.
"Outside of Napocor, the NFA is another concern along with other GOCCs," Takeda said.
The government loses at least P2 billion a year from NFA’s operations, originally intended to influence the farmgate prices of palay and the selling price of rice.
However, the national budget has not been able to support the level of operations that would allow the NFA to actually make a dent in domestic prices of palay and rice.
Finance officials have been hinting that NFA’s price subsidy should be either expanded in order to be meaningful or failing that, it should be halted and phased out altogether.
NFA’s price subsidy, however, is a highly political issue. Takeda said the IMF’s only concern was for government to ensure that GOCCs would keep within clear targets.
"I can not comment on whether the NFA is relevant or not," Takeda said. "But it is really a question of balance. Eventually if the burden is transferred to the government, it becomes a taxpayer responsibility. So it’s a balance between who will pay for it."
The Department of Finance (DOF) has already said it wanted to acquire authority over the budget programming of GOCCs in an effort to contain the consolidated public sector deficit within target levels.
Government-owned and controlled corporations are expected to generate a total financing deficit of about P42.5 billion this year, down from P90.7 billion last year.
According to Finance Secretary Cesar V. Purisima, however, the DOF would like to have a formal and standardized mechanism where the department would be able to participate in the budget programming of government corporations.
"If these corporations are going to generate deficits that the national government will have to fund, we want to have a say in it," Purisima told reporters. "Right now, it’s very loose and informal. I want a more structured and deliberate process."
Purisima compared the process to a parent company of a private conglomerate with a number of subsidiaries.
"The NG will be like the parent company of these GOCCs," he said. "Of course the GOCCs will retain the same degree of autonomy but we will have a say in their budget programming. "