OBSECREI

RP posts P19-B shortfall in Feb 08

The Philippine government posted a budget deficit of P19 billion in February 2008, a reversal of the P11.1 billion surplus posted in the same month in 2007.
"This is due mainly to higher revenues from the sale of the national government's shares in Philippine Telecommunications Investment Corp ," said Finance Secretary Margarito Teves in a press briefing.
Without the P25.239 billion in proceeds from the sale of PTIC shares last year, government would have posted a budget deficit of P14.13 billion.
Government's total revenue collection contracted 8.8% year on year in February to P81.8 billion, despite an improvement in the collection of taxes and duties by the Bureau of Internal Revenue and Bureau of Customs .
The BIR and the BOC account for about 90% of government's total revenues.
"We're better off this year in terms of tax collection," Teves noted, "The BIR's collection was up 23.4% compared to last year, the BOC's collection increased 16.6% from last year. Last year, we had problems on the tax collection side. We are encouraged by the strong revenue growth and hope to get back on track with our deficit program."
For the first two months of 2008, government's budget deficit reached P32.9 billion, 77% higher than the shortfall of P18.6 billion in the same period last year.
RP to balance budget despite Feb deficit
Meanwhile the Philippines said on Friday it hoped to balance its budget in 2008 but analysts said the task was difficult, especially with the prospect of mounting rice subsidies.
Teves said revenues were encouraging and much of government expenditure was front-loaded to the early part of the year.
"The challenge is to make sure we have the revenues to support a higher level of spending," he said.
"We are still going for ensuring we have the resources to fund our expenditure and maintain fiscal discipline and that, hopefully, will be reflected in a balanced budget."
The government has vowed a decade of budget deficits will end this year.
But it relied on state asset sales of about 90.6 billion pesos to restrict the deficit to 12.4 billion pesos, or 0.2 percent of GDP, last year, and analysts say a sustainable balance in government finances can only come about with increased tax revenues.
They said tax inefficiencies appeared to be persisting this year, despite an increase in collections by the Bureau of Internal Revenue, the main tax agency, to 50.9 billion pesos in February from 41.2 billion in February 2007.
The government has already said it may need to spend more to boost sagging growth, while rice subsidies to the National Food Authority may surge because of a sharp rise in global prices of the staple.
Domestic rice prices in March were up 10.9 percent from a year earlier.
"The under-collection of revenue persisted, that is an ongoing problem that needs to be tackled," said Christy Tan at the Bank of America.
"What is important is whether the recent problems in food supply could lead to further increases in expenses from the budget front."
The Asian Development Bank has said the cost of subsidising rice sold by the NFA could reach 21.7 billion pesos in 2008.
Teves, however, said the government had no plans to reduce the 50 percent import tariff on rice since prices were too high to attract private sector investment.
"I think the balanced budget objective would be harder to achieve this year though efforts might be made to narrow the total deficit position," said Radhika Rao at IDEAglobal.com
"Potential risk however arises from higher spending to avert any rice crisis and from this angle, any additional subsidies would weaken the government's finances considerably."
Jose Mario Cuyegkeng, economist at ING Bank, said: "I think the market will tolerate a deficit as long as it is not significant, like 1 percent of GDP or lower, and as long as it goes to our preferred areas, which is infrastructure and social services." Charo Logarta with Reuters

RP Gov't Fiscal Position
Feb 2007* Feb 2008 Jan-Feb 2008 Surplus/ P11.1-B *net of PTIC proceeds Revenues P89.6-B P81.8-B P168.8-B Expenditures P78.5-B P100.8-B P201.7-B