Fiscal consolidation still the main goal
goal, meanwhile, has been moved to 2013.
But whether Mr. Teves admits it or not, it is not him who would shoulder the bulk of the problem. He would only have to endure the pressure for five more months and then pass it on to whoever would be appointed Finance Secretary (assuming he would not be reappointed to the post). Indeed, the policies of this government could make or break the incoming president’s fiscal backbone.
Former Budget secretary and University of the Philippines ( UP) economist Benjamin E. Diokno warned that the next administration faces a “fiscal crisis” if the hemorrhage is not stopped.
So what should the government do with its shortfall expected to reach around P300 billion this year?
“We want to trim the deficit. Our aim is to achieve fiscal consolidation. We want the deficit to be lower as a percentage of GDP ( gross domestic product),” Finance Undersecretary Gil S. Beltran said in a telephone interview.
On the revenue side, Mr. Beltran said they would continue to ask the Bureau of Internal Revenue and the Bureau of Customs to improve their collection performance and continue enforcement activities.
Internal Revenue Commissioner Joel L. Tan-Torres, for his part, said the bureau would intensify its drive against erring taxpayers and forge partnerships with other agencies to expand the taxpayer database.
“We will continuously implement our programs to boost our collection this year... We will tie up with enforcement agencies to pursue cases against tax evaders. The intensified enforcement activities will help improve tax compliance,” he said in an interview.
“Part of the plan is to expand linkages with various agencies to expand our taxpayer database.”
Mr. Tan-Torres said they would also monitor and maximize other revenue sources such as estate taxes, suppliers of political parties and transactions of related companies and conglomerates.
Customs Commissioner Napoleon L. Morales, meanwhile, has committed to continue running after smugglers and pursue the bureau’s computerization of port transactions.
“We will enhance our connectivity in 2010. We will pursue the e2m ( electronic to mobile) project. We have this already in the Batangas and Manila ports. We plan to expand it next year to include Cebu, Davao and Cagayan de Oro,” he said in a telephone interview.
“We are working to plug the problem of smuggling. The computerization of transactions will help address it.”
On the expenditure side, the government plans to trim stimulus spending as it expects signs of a global economic recovery to become more apparent this year.
“We will still support a stimulus program but in a reduced scale. We expect improvements in the economy but we cannot just abandon our pump-priming efforts,” Acting Socioeconomic Planning Secretary Augusto B. Santos said in another interview.
“If there is no full recovery in 2010, we may still push for an accommodative stance in 2011. But we do not want the deficit to be too large.”
UP’s Mr. Diokno noted the need for prudent spending, saying: “With raising money to finance the deficit so much at risk, I think the next administration will have to monitor spending more carefully.”
But whether the 2010 deficit cap would be lower than the 2009 ceiling remains uncertain. And while it is easy for the government to spell out solutions, such would entail a tough balancing act.
The economic team had programmed a P250-billion deficit for 2009, a goal that would not be attained due to anemic revenues. But with the need to hike outlays to bankroll rehabilitation plans and the expected impact of tax cuts enacted by Congress, the Development Budget Coordination Committee felt the need to adjust the P233- billion ceiling for 2010.
But as to whether the 2010 program will be higher or lower than the 2009 cap, the economic managers have been tight-lipped. The emerging figure is P293 billion. They, however, assured that the 2010 program would be lower than the worst case scenario of a P300-billion deficit last year.
“We are adjusting our fiscal program to reflect the impact of the lower economic growth on our revenue collection efforts and increase spending to continue supporting sustained economic recovery,” Mr. Teves said.
“While we are making these adjustments in our fiscal program to address urgent needs, we believe there is a need to continue pursuing fiscal consolidation in the medium term.”
Officials have said that a higher deficit would pressure the government to borrow more and consequently incur a higher debt. For this year’s borrowing plan, Finance officials have said the government would issue dollar-denominated bonds, yendenominated or Samurai bonds, and domestic Treasury papers.
On Jan. 7, it raised $1.5 billion in dollar- denominated bonds, becoming the first country in the region to tap the bond market this year. It is slated to issue up to $ 1 billion worth of Samurai bonds after it reached an agreement with the Japan Bank for International Cooperation over guarantee fees.
The year 2009 saw the government tapping the commercial debt market thrice to plug a swelling deficit.
This month, the Philippines floated $ 1.5 billion worth of 10-year papers to the overseas market, the first offering by an Asian borrower that year. A decision to widen last year’s deficit cap to P250 billion from P199.2 billion has prompted the government to issue $ 750 million worth of 10- year papers. It returned to the overseas market in October to sell $ 1 billion worth of 25-year, dollardenominated bonds, the proceeds of which were intended to pre- fund 2010 expenditures.
The government also raised P114 billion from the sale of retail Treasury bonds to local investors in September. It also planned to sell up to $1 billion worth of Samurai bonds last year — a borrowing that has been moved to this year.
Experts have stressed the importance of raising revenues.
“On the revenue side, you have to do better in terms of administration... You also have to close that open door of smuggling. The new administration may also want to review the revenue-eroding measures to see which of them is redundant,” former Finance secretary Roberto F. de Ocampo said in a recent interview.
“A large fiscal deficit will have to be controlled or growth will not be vibrant as one hopes it to be... If there is a large deficit, the government has to borrow large sums of money. Instead of building infrastructure, it will be used to pay debts.”
For his part, University of Asia and the Pacific economist Victor A. Abola said the market would want to see if state revenues would pick up this year.
“What the market is looking at now is whether the revenues will recover next year... If the deficit is below P300 billion, it would be a little better since investors may not push interest rates up,” he said.