The NG budget deficit narrowed in March

Workers are seen at a construction site in Manila. – Philippine Star / Russell Palma

By Tobias Jared Thomas

The budget gap of the national government (NG) has narrowed Revenue collection and expenditure doubles in March, Treasury Bureau (BTR) Reported Wednesday.

BTr’s data show that the Philippine budget deficit narrowed 1.97% to P187.7 billion in March, from P191.4 billion in the same month in 2021.

Month by month, d fiThe scale gap has expanded from P105.8 billion dfiCit in February.

Financial performance of the national governmentDue to higher national tax allocations and budget support for state-owned and regulated corporations, government spending rose 18.14% year-on-year to P481.55 billion in March.

Since this year, local government units have been given a large share in the collection of national taxes as well as the transfer of basic services due to the Mandanas regime.

The BTR said spending also increased as the Department of Education and the Higher Education Commission released funds for the scholarship program, while the Department of Public Works and Highways and the Department of National Defense implemented capital expenditure projects.

Initial spending, or net interest payments, rose 18.35% to P426 billion in March.

Interest payments rose 16.54% to P55.5 billion.

State revenues, meanwhile, rose 35.96% year-on-year to P293.9 billion in March, as the economy slowly revived after epidemic restrictions eased.

During the month, tax revenue rose 28.69% to P244.1 billion, and non-tax revenue rose 88% to P49.8 billion.

Metro Manila and other areas were brought down to the mildest warning level since March, as coronavirus infections declined.

The Bureau of Internal Revenue (BIR) collected P170.4 billion, up 27.76% year-on-year, while the Bureau of Customs (BoC) collected P70.8 billion, an increase of 29.33%.

The Treasury reported revenue of .4 33.4 billion in March, up 107% from a year earlier, due to higher dividend remittances, earnings from bond sinking fund investments and National Government shares from the Philippine Amusement and Gaming Corporation.

Q1 Deficit
For fiFirst Quarterly, Budget dficit decreased 1.44% to P316.8 billion, from P321.5 billion in the same period of 2021.

To date, revenue has grown 12.62% to P784.4 billion, while expenditure has increased 8.18% to P1.10 trillion.

During the January-March period, tax collection increased by 11.73% to P697.2 billion, thanks to a 7% increase in BIR’s collection to P502.8 billion. BoC’s revenue rose 26.39% to P188.6 billion in three months.

Michael L., chief economist at Rizal Commercial Banking Corporation. Rickafort said the resumption of the economy has enabled the government to increase tax collection in the first quarter. He noted that government spending on epidemic response could be reduced after the implementation of the granular lockdown.

“Restoring the economy to greater normalcy, such as the proposed nationwide precautionary Level 1 tax cuts, will help improve the government’s tax revenue collection,” Mr Ricafort added.

ING Bank NV Manilar Senior Economist Nicholas Antonio T. Mappa said spending on infrastructure projects had risen because of “last-minute” spending before the election ban began.

“Revenue growth could be linked to a 107% increase in debt (BTr) associated with the issuance of retail treasury bonds and a 70.8% increase in the BoC due to more expensive fuels,” said Mr Mapa.

Mr Rickafort said sustaining improved financial performance would depend on the next administration’s ability to bring together a “credible and competent” economic group, rapid tax collection and good governance.

These measures will be needed to repay the debt since the onset of the epidemic, he added.

The country borrowed P1.31 trillion for the Covid-19 response from 2020 to January 14, 2022, and received grants worth P2.7 billion.

“In the coming months, and with the change of leadership, the new administration will have to walk a very thin line of financial prudence at a time when economic support may be needed. The next president will inherit a significant amount of debt, which will affect his ability to hit the ground running, “said Mr Mapa.

The government has set a budgetfiThe cit ceiling of P1.65 trillion for 2022 is equivalent to 7.7% of GDP.

Asia Pacific
Fitch Ratings, meanwhile, said it expects general government deficits in many Asia-Pacific economies, including the Philippines, to shrink this year, although still significantly higher than pre-epidemic levels.

“The stagnant economic recovery in a large part of Asia is one of the main reasons for the high sustainable deficit, because the emergence of epidemic-related headwinds is slower than in other regions. Political tolerance for higher deficits could also be higher, for example, in Australia and Korea, where there were strong economic returns, “Fitch said in a note on Wednesday.

It noted that sharp rise in commodity prices could pose a “growing risk” to revenue consolidation.

“Some governments have raised implicit or explicit subsidies to reduce the impact on households … revenue growth may be even lower as commodity prices dampen economic performance,” Fitch said.

Asia-Pacific will also have to deal with rising interest rates as borrowing costs rise amid tightening monetary policy from major central banks, such as the US Federal Reserve, it added.

Fitch says limited debt reduction in Asia-PacificfiC Most likely, many economies will return to high growth in the next few years. However, it may not be enough to quickly reduce the amount of debt during an epidemic.

“Uncertainty over the direction of debt drives our negative outlook in India. They are a factor combined with the potential medium-term growth challenge in the Philippines, ”it says.

The government is developing a financial consolidation plan for national debt management.

By the end of 2021, the country’s outstanding debt was P11.73 trillion. This pushed the debt-to-GDP ratio to a 16-year high of 60.5%, just outside the 60% threshold considered by multilateral lenders to be manageable for a developing economy.

Debt observers in February maintained a negative outlook for the Philippine investment grade “BBB” rating. This means that there is still a possibility of credit downgrade in the next 12 to 18 months. – With LWTN

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