Group warns of new fiscal challenge for RP

MANILA, Philippines – The government’s five-month fiscal deficit of P123.2 billion signifies that the country is on the verge of a renewed fiscal crisis, the non-government think-tank IBON Foundation said during the weekend.

IBON said the government’s swelling deficit underscores the need to revisit the country’s debt policy up to “the maximum of outright debt cancellation to free up domestic resources.”

The January-May deficit is nearly seven times the budget deficit of P18.8 billion during the same period last year, latest data from the government showed.

IBON said as it is, the deficit trend is similar to that in 2002 when it reached a record P210.7 billion or equivalent to 5.4 percent of gross domestic product (GDP).

The first quarter deficit in 2002 of P61.2 billion was equivalent to 6.8 percent of GDP while the first quarter 2009 deficit of P119.7 billion is ominously similar at 6.9 percent of GDP, IBON pointed out.

It said that what happened in 2002 could happen again this year especially because of dwindling revenues.

Total revenues in the first five months of 2009 of P456.2 billion was down 5.4 percent from the same period last year. Drastically slowing economic growth amid the global turmoil and a moderating of global oil prices is part of the reason for this, which could even be worse in the coming months, IBON said.

 “If revenue performance for the rest of the year remains the same as in the January to May period, the national government could face a deficit of some P287.9 billion by the end of the 2009,” IBON said.

It added that such development is really a sign of “renewed fiscal distress.”

According to IBON, the more basic reason for government’s fiscal troubles is that it is dealing with this according to distorted priorities.

“Economic managers are quick to push for new taxes, higher government fees and charges, and cutbacks on social services spending. Yet the most important sources of deficit pressures are unaddressed: graft and corruption, trade liberalization, foreign investment incentives, unproductive debt,” IBON said. – Iris Gonzales