by Cai Ordinario/B' Mirror/11.20.08
HAVING admitted that hitting a balanced budget is no longer feasible for 2010, the National Economic and Development Authority (Neda) said members of the Development Budget Coordination Committee (DBCC) are now discussing the possibility of having a deficit that's 0.5 percent to 1 percent of the gross domestic product (GDP) by 2010.
Senate President Juan Ponce Enrile said ballooning budget-deficit projections in 2009 would likely prompt Congress to speed up passage of laws to “reduce tax exemptions given to certain sectors of the economy” rather than pass new taxes with the country still reeling from the global financial meltdown.
Sen. Edgardo Angara agreed, saying the government should adopt tax cuts to give the people respite from the backlash of the worldwide economic slowdown.
Angara suggested that the government temporarily cut the 12-percent value-added tax (VAT) to 10 percent for at least two years “to give back spending money to households and spur domestic spending.”
“This and other [tax-relief measures] could be time-bound given that economic experts have predicted that the international financial crisis could last for at least 24 months,” Angara added.
Neda Director General Ralph Recto, also the socioeconomic planning secretary, said the 0.5 percent to 1 percent of the GDP figure is not yet final. He, however, estimated that this might translate into a deficit of around P90 billion to P95 billion.
“It will be hard to do a balanced budget in 2010. A deficit of 0.5 [percent] to 1 percent of GDP, I estimate, would be around P90 billion to P95 billion,” Recto told reporters on Wednesday.
“There is no decision on this yet; there is also no proposal. But this has been discussed [among] DBCC members,” he added.
The DBCC is an interagency committee composed of the secretary of budget and management as chairman; the director-general of the Neda as cochairman; and the Executive Secretary, secretary of finance, and the governor of the central bank of the Philippines as members.
The committee determines the level of annual government expenditures and the ceiling of government spending for economic and social development, national defense and government debt service; the proper allocation of expenditures for each development activity between current operating expenditures and capital outlays; and the amount set to be allocated for capital outlays broken down into the various capital or infrastructure projects.
Recto explained that the 2010 deficit would help finance the government’s increased infrastructure and social-spending program, which will include the conditional cash-transfer program and infrastructure projects, which the government is eyeing to speed up.
Besides this, Recto also cited a need to recapitalize the Bangko Sentral ng Pilipinas (BSP) and provide funds for one-time expenses, such as the possible computerization of the May 2010 presidential elections.
However, besides the fact that a deficit is necessary to finance all the monetary needs of the government, Recto said there is a need to improve the quality of spending the deficit—making sure it will help improve the economy, such as increase the number of jobs created annually.
Speaking to reporters after a committee hearing, Enrile acknowledged that the 2009 budget deficit will increase, “and if there is a need to pass new laws or revise present laws to refine them in order to reduce the exemptions being given to certain sectors of the economy, then it is possible that that will be done.”
Enrile assured, however, that “at the moment, there is no definite effort to impose new taxes [but] the rationalization of tax-incentives laws.”
In the same interview, Enrile confirmed he would stay on as concurrent chairman of the finance committee until the conclusion of floor deliberations on the P1.4-trillion proposed national budget for next year.
“We are in the middle of the debates…I have to finish it because I was the one who heard the matter,” Enrile told reporters.
He said the Senate finance committee is currently reviewing the readjusted revenue projections to support proposed expenditures in the 2009 budget bill, adding that “there is no realignment yet because we are still verifying the assumptions.”
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