ADB urges RP to increase spending on education, infra

The Asian Development Bank (ADB) said government spending on education and infrastructure should increase, saying that revenue flow should balance the budget instead of budget cuts.

This developed as the ADB said it is reviewing its approach to the Philippines to come up with more relevant development products that would respond better to its shifting requirements.

According to ADB country director Tom Crouch, revenues have to go up precisely to allow an increase in spending while staying within the program to balance the budget by 2008.

According to Crouch, the ADB was satisfied with the Arroyo administration’s handling of its fiscal program. Although the budget surplus in April indicated some under-spending, he said the ADB is more concerned with the overall program.

"It can be dangerous focus on results for a particular month," Crouch said. "Of course we will be delighted if every month there is a budget surplus but we don’t want to get either too depressed or too excited by one month’s results. We need to look at long-term trends and broadly we see good signs that the Philippines is on track," he added.

Crouch said there was an urgent need for more spending rather than less, particularly for perennial concerns like education and infrastructure.

"There is no inconsistency between fiscal consolidation and increased spending in these key areas because we need to achieve fiscal consolidation through better revenue generation, not budget cuts," he said.

Crouch said revenues have to increase while improving efficiency in the delivery of basic services through government owned and controlled corporations.

In the meantime, Crouch said the ADB would have to alter its participation with the country’s development program to increase its share in the form of new lending.

Crouch said the government’s fiscal limitations have constrained the ADB’s dealings with the country over the last several years.

"But now, two things have happened. One is that the fiscal position is improving so on the demand side things are looking brighter for us to be able to expand our engagement," Crouch said.

"On the supply side, the ADB itself has recognized that for a number of our clients like the Philippines, we need to make ourselves more relevant," he added. "We need to change the way we do business."

Over the last few years, Crouch said the ADB has already developed a menu of new products to keep itself relevant and responsive to the needs of countries like the Philippines.