By Ben O. de Vera, October 2 2018; Philippine Daily Inquirer
Image Credit to Wall Street Journal
The government will keep the budget deficit cap it earlier programmed for the next two years even as the International Monetary Fund (IMF) proposed to narrow it to reduce overheating risks.
On the sidelines of the “Green, Green, Green” program launch Monday, Budget Secretary Benjamin E. Diokno told reporters the government even expected the actual fiscal deficit to go below 3 percent.
Yet, the interagency Development Budget Development Committee (DBCC) would retain the budget deficit ceiling equivalent to 3 percent and 3.2 percent of gross domestic product (GDP) respectively in 2018 and 2019, Diokno said.
The Cabinet-level DBCC will meet on Oct. 16 to revisit macroeconomic and other fiscal targets.
“We decided not to follow them (the IMF),” Diokno added, noting the IMF first proposed cutting the budget deficit in July.
“We told them the budget deficit will be 3 percent. To me, that’s reasonable, we are not extravagant. In my experience, if you cut the deficit in the middle of the fiscal year, the bureaucracy will be afraid to spend because they think they’ll deplete the funds, so they would rather not touch the money,” the Budget chief said.
Last Friday, the IMF urged anew the Philippine government to bring down its budget deficit cap to 2.4-2.5 percent of GDP in the next two years.
IMF resident representative in the Philippines Yongzheng Yang told reporters a “neutral” fiscal stance can be done by cutting down on “non-priority” spending items, such as special purpose funds in the annual national budget.
Diokno said the special purpose funds cannot be slashed as the calamity and contingency funds were being sourced from there.
“The President is asking us to create many contingencies,” Diokno added.
He insisted the government would “keep the deficit manageable.”
The wider budget deficit cap for next year would accelerate the “Build, Build, Build” infrastructure program, he said.
Yang said the government does not have to scrimp on infrastructure expenditures to reduce the budget deficit.
“Infrastructure spending should be maintained, as it is important for long-term growth,” Yang said. He said slashing non-priority expenditures would give “more room for priority infrastructure.”
The IMF’s executive board also earlier said bringing down the budget deficit, through “careful selection and management of infrastructure projects to maximize their impact on growth,” would “avoid overburdening monetary policy.”
Yang added the fiscal deficit could be neutralized by intensifying tax collection efforts, mainly by implementing tax administration measures such as lifting the bank secrecy law for tax purposes.