2019 budget assumptions in focus
PRESIDENT Rodrigo R. Duterte submitted the proposed 2019 national budget to Congress after his State of the Nation Address (SONA) on Monday, setting into motion legislative hearings which, economists said, will do well to pay close attention to changing economic conditions.
Presidential Spokesperson Harry L. Roque, Jr. said in a press briefing on Tuesday that the Executive branch submitted the P3.757-trillion proposed 2019 budget, which was approved by the Cabinet on July 9, after the SONA and amid the tumultuous change in leadership at the House of Representatives that saw former president Pampanga Rep. Gloria M. Arroyo ( second district), an economist, replacing Rep. Pantaleon D. Alvarez of Davao Del Norte’s first district as speaker.
“… [ P]agkatapos po ng makulay na pangyayari sa Kamara, naisumite rin po ang 2019 budget kahapon ( Regarding the 2019 budget, after the colorful events at the House, we were able to submit the 2019 budget yesterday). We commend the Department of Budget and Management for the early submission of the 2019 national budget… after the State of the Nation Address,” Mr. Roque said.
The proposed 2019 “cashbased” budget is slightly less than the P3.767- trillion obligationbased budget this year since the former provides for disbursements only within the fiscal year. Obligation-based budgets, in contrast, allow state offices to disburse funds for over two years.
According to the President’s budget message, “projects that will advance infrastructure development (under the Build Build Build Program) and human capital development (focused on education and health) are particularly highlighted and supported.”
Cash- based appropriations, the message added, will “promote better- designed, better- coordinated projects and programs from our agencies and speed up the delivery of goods and services to our people, obligations, or contracts for programs, activities and projects for implementation during the fiscal year…”
“Under the current obligationbased budget, agency performance is based on contracts awarded for the year, even if these contracts deliver their goods and services in the following years. Due to the pile-up of undelivered contracts, it is not unheard of that payments to performing contractors be inordinately delayed and that unscrupulous contractors are given advanced payments,” the budget message read.
“It is imperative that we modernize our budgeting system to meet international standards and adopt good practices.”
The disbursement program proposed for 2019 totals P3.832 trillion, 13.7% more than this year’s P3.37 trillion. Target revenues total P3.208 trillion, 12.7% more than the P2.846 trillion this year, leaving a fiscal deficit of P624.4 billion that is 19.23% bigger than the P523.68-billion deficit ceiling for this year.
Ahead of the start of public hearings on the proposed budget by the House committee on appropriations on July 31, economists interviewed yesterday cited the need to keep tabs on changing economic conditions, including on quickening inflation and the depreciating peso.
“Currently, the proposed budget is at its highest not only because of the anticipated inflationary trend that the economy is bound to face next year but also because of… the much-anticipated governments’ Build! Build! Build! infrastructure program,” Emmanuel J. Lopez, economist and the Dean of Colegio de San Juan de Letran’s Graduate School, said in an e-mail.
Mr. Duterte in his budget message said that Republic Act No. 10963, or the Tax Reform for Acceleration and Inclusion law, accounted for just 0.4 of a percentage point of the 4.3% first- half inflation pace and that external economic developments were at play in driving overall increases in prices of widely used goods.
He also assured that the 2019 budget provides for social mitigating measures against inflation, such as the increase of the monthly unconditional cash transfer to P300 from P200 currently, and of the Pantawid Pasada Program
conditional cash transfer budget to P3.9 billion from P1 billion.
It also cited key programs to protect marginalized sectors such as the National Health Insurance program, free tertiary education, free education, basic education facilities program, as well as rice subsidy for military and other uniformed personnel.
“Basing from the past two fiscal years of the Duterte administration budget expenditures, appropriations seem to be in place and expended wisely,” said Mr. Lopez.
Emmanuel A. Leyco, a professor at the Asian Institute of Management, said in a mobile phone message that: “Cash-based budgeting is a good approach that will require strict discipline among agency administrators.”
“The major challenge for them are the assumptions they made in the budget preparation. If these assumptions do not materialize, they should be prepared to make prompt adjustments along the way,” he added.
The Development Budget Coordination Committee assumed a 4-4.5% inflation this year and 2-4% for 2019; as well as a P50- to P53-per-dollar exchange rate, among other assumptions for computing appropriations.
Mitzie Irene P. Conchada, vice-dean at the De La Salle University School of Economics, said separately: “It would be interesting to note how the administration will utilize the budget for its major projects such as the Build, Build, Build project on infrastructure.”
“One thing to be cautious about is its impact on the depreciation of the peso since infrastructure projects requires materials that are mostly imported,” she explained.
The budget message counted the Metro Manila Subway project and the Pasig River Ferry Convergence program among key infrastructure investments in 2019 for Metro Manila; the Philippine National Railways (PNR) Manila-Laguna South Commuter rail, Malolos-Tutuban PNR North 1 rail, and the Chico River Pump Irrigation for other areas in Luzon; the Panglao International Airport, New Cebu International Container Port for the Visayas; as well as the Mindanao Railway project and the Davao International Airport for Mindanao, among others.