Budget deficit target to take a hit this year

Realignment, automatic releases

MANILA, Philippines — The budget deficit target for the year could take a hit following Congress’ adjustments and as the government needs to release its obligations for foreign-assisted projects even without the trigger of excess revenues.

Budget Secretary Amenah Pangandaman said the budget gap for 2025 will likely be impacted by several factors, but the administration is optimistic that election-related spending could still offset such a scenario.

Specifically, there are foreign-assisted projects that were defunded and whose budget was moved to other programs.

“There is a special provision in the unprogrammed appropriations that if these are loan proceeds, we have to release it already,” Pangandaman told The STAR on the sidelines of the recent Financial Executives Institute of the Philippines membership meeting.

“This means that it could hit or affect our deficit level because it will not have corresponding excess revenues,” she said.

Unprogrammed appropriations provide standby authority to incur additional agency obligations for priority programs or projects when revenue collection exceeds targets or when additional grants or foreign funds are generated.

Releasing funds from this would need certification from the Bureau of the Treasury.

Under this year’s controversial P6.326-trillion national budget, P363.24 billion has been earmarked for unprogrammed appropriations. However, only P158.7 billion was proposed by the executive department.

Of the P363 billion, P112.15 billion covering 41 items was allocated for support to foreign-assisted projects.

“We will release it automatically as requested and as part of our obligation to foreign contractors and part of our agreement,” Pangandaman said.

“For the government counterpart, unfortunately, we need to get the trigger of additional revenue. We already provided the level that is expected for the Department of Finance to at least accumulate for the next months. We have to pay for our obligations,” she said.

Despite possible challenges, Pangandaman remains optimistic that the deficit as a percentage of gross domestic product (GDP) will still be achieved for 2025.

Under the medium-term fiscal framework, this year’s budget gap is projected to reach P1.54 trillion, up two percent from the 2024 level of P1.51 trillion.

As a percentage of GDP, the deficit is expected to ease to 5.3 percent from 5.7 percent in 2024.

“Last year, fortunately, we had excess revenues so we were able to address our deficit and our economy also grew faster,” Pangandaman said.

“I think we will still hit our target this year especially with the election, this would help our economy,” she said.

De La Salle University economist Ma. Ella Oplas is already expecting that the deficit would be higher this year especially with projects such as Ayuda sa Kapos at Kita Program (AKAP) that has the tendency to be unsustainable and misdirected.

Oplas argued that the government is already in a budget deficit and yet it keeps on insisting for programs that could eat up more resources.

“Fiscal policy is a trade off. If we want to add an expenditure item, that means we have to cut down on something. Otherwise, we will just borrow,” Oplas told The STAR.

While Oplas believes that while the economy will grow this year, this will just be offset by unnecessary spending.

“The growth is election driven but the money in circulation is also election money, which partly came from the government,” Oplas said.