Gov’t underspending leads to narrower budget deficit as of April

MANILA, Philippines – The Philippines narrowed its budget deficit in the 1st 4 months of the year to P115.9 billion, after it posted a budget surplus in April alone, signaling that the government has been spending less than what has been budgeted.

A budget deficit happens when expenses exceed revenues, while a surplus means revenues exceed expenses. Both are indicators of an economy’s financial health.

Underspending, meanwhile, has been a perennial problem in the Philippines, an issue that Budget Secretary Benjamin Diokno once described as “epic incompetence” during the Aquino administration in 2015. When government underspends, delivery of services is delayed.

Quoting officials from the Department of Finance (DOF), Reuters on Wednesday, May 23, reported that the country’s deficit from January to April was at P115.9 billion, lower than the P167.1-billion projection. This is also a decrease from the P162.2-billion deficit in the 1st 3 months of the year.

This, however, is higher than the P30.2-billion deficit in the same period a year ago.

While the DOF did not disclose the April figures, Reuters said that based on its calculations, the government posted a budget surplus of P46.3 billion in April.

For 2018, the economic team of President Rodrigo Duterte has set a budget deficit cap of P523.6 billion, which is equivalent to 3% of the country’s gross domestic product.

In an opinion piece for Rappler published in December 2017, University of the Philippines (UP) School of Economics teaching fellow JC Punongbayan noted that budget deficits are “not bad per se.”

“Just like any household or firm, the government also needs to spend beyond its means from time to time. For example, when the government has important items to spend on – such as key infrastructure projects and social services – then budget deficits are okay,” he said.

But he added: “We want the budget deficit to be sustainable. After all, each month of budget deficit adds to the country’s stock of debt.”

The government had said the Philippines is not yet ready for a balanced budget, as deficits will be needed until 2022 to address the infrastructure backlog and eventually address the high socioeconomic inequality.

A balanced budget means revenues are equal to expenditures. (READ: Balanced budget ‘impractical’ for the PH until 2022 – Diokno) – Rappler.com