WB says deferring balanced budget to 2010 won’t harm economy

The government’s move to postpone its balanced budget goal to 2010 will not be detrimental to the economy as long as this is complemented by continued efforts to enhance revenues, the World Bank said.

World Bank country director for the Philippines Bert Hofman said the government should continue with its efforts to raise revenues even as it has decided to incur a deficit of P75 billion this year.

“Postponing the balanced budget goal is alright as long as the efforts on the revenue side continue,” Hofman said.

This as the government has decided to defer its balanced budget goal to 2010 instead of this year amid a difficult economic environment.

“There really is a bit of a slowdown in the global economy,” the World Bank executive said.

Fiscal authorities said the government expects to incur a deficit of P75 billion this year, with the additional funds to be used for infrastructure spending and social services. Government economic managers have agreed to boost spending to help the country weather a global economic slowdown brought about by soaring oil and food prices.

Hofman said measures that would improve revenues include improving the operations of the Bureau of Internal Revenue and the Bureau of Customs and reforming the country’s excise tax system.

On the excise tax system, he said the country’s excise taxes should be indexed to inflation as this would boost state coffers.  At present, excise taxes on cigarettes are pegged at 1997 prices.

As of end-May, the government’s budget deficit stood at P18.8 billion from P41.8 billion in the same period last year.