analysis on 2014 budget

7/27/2019 Analysis on 2014 Budget

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Professor Emeritus Leonor Magtolis BrionesFormer National Treasurer

Lead Convenor, Social Watch Philippines


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Importance of the Budget inNational Development The Philippines is facing many challenges, the

most serious of which are poverty, climatechange, health and education, andunemployment.

The budget is the most powerful instrument of thegovernment in responding to these problems.

It can be an instrument for the redistribution ofincome groups to fund services and create jobs forthe poor.

The budget can be used to provide education andhealth services, as well as training and capacitybuilding and fund projects to create employment.

The budget can be used to stabilize the economyand control inflation.


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Importance of the Role of theCongress in the Budget The need to ask questions on the analysis

of the government on the performance ofthe economy, its policies, thrusts andpriorities

The need to ask questions on what isexplicitly stated, and also the moreimplicit or what is not there

The need to engage the executive onlongstanding issues on citizensparticipation, special purpose funds, etc.

The need to demand accountability fromthe government


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Importance of the Role of theCongress in the Budget

The Budget is an instrument of fiscalpolicy which includes policies on revenues,expenditures and borrowing

The Budget as part of fiscal policy hasthree functions:Allocation functionDistribution functionStabilization functionTo these three functions, I add theDevelopment function


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Macroeconomic Assumptions

PARAMETERS 2012

Actual

2013

Adjusted

2014

Projected

RealGNIGrowth%

RealGDPGrowth%

Infla3on%

64-DayT-billRate%

FOREX(P/US$)

UnemploymentRate%

6.5

6.8

.2

2.0

42.25

7.0

5.96.9

6.07.0

.05.0

1.0.0

41.0-4.0

6.8

6.2-7.2

6.57.5

.05.0

2.04.0

41.04.0

6.7

Source: DBM BESF based on BSP, NEDA, NSCB data

If attainable, will projected GDP and GNI growth rates beget job creation?


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Economic Performance(2012 | Q1 & Q2 2013)

Sector 2012 (Actual) 2013Q1 Q2 Q3 Q4 FY Q1* Q2

Supplyside

Agriculture,Fishery and

Forestry

1.1 0.6 4.4 4.9 2.8 3.1 -0.3

Industry 5.3 5.8 7.1 8.9 6.8 10.9 10.3

Services 8.4 7.7 8.0 6.5 7.6 6.8 7.4Demandside

HouseholdConsumption

6.9 6.6 6.7 6.2 6.6 5.5 5.2

GovernmentConsumption

21.3 7.2 12.3 9.5 12.2 13.2 17.0

Capital Formation -31.3 3.6 6.2 9.5 -3.2 44.5 13.2

Imports -1.9 8.3 7.0 8.0 5.3 2.0 -3.0

Exports 9.8 10.8 6.2 8.6 8.9 -7.6 -6.5

Gross Domestic Product 6.5 6.3 7.3 7.1 6.8 7.7 7.5

Gross National Income 5.7 6.5 7.3 6.4 6.5 7.8 6.8

*Revised

Source: National Accounts of the Philippines, National Statistical Coordination Board (NSCB)


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Agriculture, Hunting, Forestry & Fishing(Growth rates in %)

Annual 2013

2011 2012 Q1* Q2 1st Sem

AHFF 2.6 2.8 3.1 -0.3 1.4

Palay 5.9 8.0 4.5 -1.8 1.4

Corn 9.5 6.3 11.4 -25.9 -4.2

Coconut/copra -1.7 3.9 -1.0 -1.5 -1.1Sugarcane 59.7 -8.7 -2.7 -23.0 -7.8

Banana 0.7 0.7 -6.2 -10.9 -8.8

Mango -4.9 -1.6 4.4 7.3 6.6

Pineapple 3.2 7.1 5.8 1.2 3.6

Coffee -5.7 -0.8 -12.3 -3.8 -10.6

Cassava 5.1 -0.7 0.9 1.2 1.1

Rubber 7.5 4.6 -0.2 -2.5 -1.8

*RevisedSource: National Accounts of the Philippines, NSCB


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Agriculture, Hunting, Forestry & Fishing(Growth rates in %)

Annual 2013

2011 2012 Q1* Q2 1stSem

AHFF 2.6 2.8 3.1 -0.3 1.4

Othercrops

-3.9 1.5 4.1 3.3 3.7

Livestock 2.0 1.1 0.3 3.9 2.1

Poultry 4.4 4.6 2.8 6.0 4.2

Agri.activities

3.2 2.0 2.8 -1.1 0.7

Forestry 58.3 -6.4 15.8 14.2 15.0

Fishing -4.3 -0.4 5.8 3.3 4.6



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Industry (Growth rates in %)

Annual 2013

2011 2012 Q1* Q2 1st Sem

Industry 1.8 6.8 10.9 10.3 10.6

Mining andQuarrying

7.0 2.2 -1.9 -2.7 -2.4

Manufacturing 4.7 5.4 9.5 10.3 9.9

Construction -9.8 15.7 29.3 17.4 22.6

Electric Gas &Water Supply 0.6 5.1 0.3 5.5 3.0



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Services (Growth rates in %)

Annual 2013

2011 2012 Q1* Q2 1ST Sem

Services 4.9 7.6 6.8 7.4 7.1

Transport, Storage and

Communication

4.3 8.1 2.8 3.5 3.2

Trade 3.3 7.5 5.5 7.3 6.4

FinancialIntermediation

5.2 8.2 18.0 9.6 13.5

Real Estate, Renting

and BusinessActivities

8.4 7.5 5.8 9.5 7.8

Public Administration,Defense and SocialSecurity

1.9 6.1 8.3 5.9 7.0

Other Services 5.6 7.7 5.3 7.4 6.4*RevisedSource: National Accounts of the Philippines, NSCB


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Expenditure (Growth rates in %)

Annual 2013

2011 2012 Q1* Q2 1ST Sem

Household CFE 6.3 6.1 5.5 5.2 5.3

Govt CFE 1.0 11.8 13.2 17.0 15.3

Construction -6.2 13.7 30.1 15.6 22.1

Durable Equipment 5.2 5.7 9.6 5.7 7.9

Breeding Stock &Orchard Dev't

-0.3 1.4 0.6 -1.1 -0.2

Intellectual PropertyProducts

11.8 16.9 10.4 16.2 12.9

Exports of Goods -6.0 8.4 -8.9 -8.7 -8.8

Exports of Services 4.0 9.8 -3.2 4.0 0.2

Imports of Goods 0.4 2.6 0.8 -4.0 -1.8

Imports of Services -0.7 11.1 6.5 2.4 4.5

*Revised

Source: National Accounts of the Philippines, NSCB


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Construction (Growth rates in %)

Annual 2013

2011

2012 Q1* Q2 1stSem

Construction

-6.2 13.7 30.1 15.6 22.1

Public -31.8 32.4 45.6 31.1 36.2

Private 4.5 8.6 26.3 9.0 17.4



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Implications for the 2014 Budget

If we want the national budget totackle problems of poverty, hungerand unemployment, it has to focus onthe sectors where the poorest are andwhere unemployment is highest.

While the GDP for the first quarter ofthe year is impressive and well withinthe macroeconomic assumptions, thedistribution of such GDP deserves a

closer look. The 2014 budget should address the

gaps and distributional issues of theGDP to ensure that economic growth

is enjoyed by all.


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Poverty

SWS: On average, 5 out of 10 Filipinos consider themselves as poor (Q2 2013)NSCB: 2 out of 10 (22%) Filipino families are poor (NSCB Refined Poverty, 2012)

Source: Social Weather Stations, accessed at on August 5, 2013


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Poverty remained practicallyunchanged

Source: 2012 Poverty Statistics, National Statistical Coordination Board


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Hunger

Source: Social Weather Stations, accessed at on August 18, 2013

Number of Filipinos suffering from hunger is on the risedespite robust growth


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Unemployment

Unemployment slightly increases in Q1 2013, and howabout underemployment?

Source: Social Weather Stations, accessed at on May 7, 2013


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Age Distribution of Unemployment

Source: Social Weather Stations, accessed at on April 24, 2013

Most of the unemployed persons are youth!


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Gender Distribution of Unemployment

Source: Social Weather Stations, accessed at on April 24, 2013

Most of the unemployed persons are women!


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Higher underemployment rate

Source: Labor Force Survey, National Statistics Office


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Income Distribution:Income Inequality Persists

INCOME DECILE 1st

Sem2006

1st

Sem2009

1st

Sem2012

PERCENTAGEPOINT CHANGE

1st Sem2006-2009

1st Sem2009-2012

1ST TO 3RD 10.3 11.1 10.9 0.8 (0.2)

FIRST 2.5 2.7 2.7 0.2 0.0

SECOND 3.5 3.8 3.8 0.3 (0.1)

THIRD 4.3 4.6 4.5 0.3 (0.1)

4TH TO 7TH 28.5 28.8 28.9 0.3 0.1

FOURTH 5.2 5.4 5.4 0.2 0.0

FIFTH 6.2 6.3 6.4 0.1 0.1

SIXTH 7.6 7.7 7.7 0.1 0.0

SEVENTH 9.5 9.4 9.4 (0.1) 0.0

8TH TO 10TH 61.4 60.4 60.0 (1.0) (0.3)

EIGHTH 12.1 11.9 12.0 (0.2) 0.2

NINTH 16.6 16.1 16.0 (0.4) (0.1)

TENTH 32.7 32.4 32.0 (0.3) (0.4)

6%

50%



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Total income of Top 20% is approx 8times of total income of Bottom 20%

INCOME DECILE1st Sem2006

1st Sem2009

1st Sem2012

PERCENTAGEPOINT CHANGE

1st Sem2006-2009

1st Sem2009-2012

Ratio of Top30% overBottom 30%

5.97 5.45 5.50 (0.52) 0.05

Ratio of Top20% overBottom 20%

8.21 7.44 7.50 (0.77) 0.06

Ratio of Top10% over

Bottom 10%

13.12 12.06 12.07 (1.05) 0.01

8 times



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The Macroeconomic Picture and the2014 Budget

While growth is expected in 2013 and 2014, risksand challenges remain.

Social picture gives much cause for concern.Poverty, hunger and unemployment remainintractable problems.

The national budget is a powerful tool to addressthese problems. Government and expenditure

policies, if used to finance appropriate programsand projects to address these economic andsocial threats, can be a powerful tool forimproving peoples lives.


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PARTICULARS2012

Actual2013

Adjusted2014

Proposed

Levels in Billion PesosRevenuesDisbursementsSurplus/(Deficit)Obligation Budget

Per cent of GDPRevenuesDisbursements

Surplus/(Deficit)Obligation Budget

Growth RateRevenuesDisbursementsSurplus/(Deficit)*

Obligation Budget

1,534.91,777.8(242.8)1,816.0

14.516.8

(2.3)17.0

12.914.1

(19.0)

14.9

1,745.91,983.9(238.0)2,005.9

14.716.7

(2.0)16.9

13.711.6

(1.1)

10.5

2,018.12,284.3(266.2)2,268.0

16.118.1

(2.0)17.0

15.615.1

(11.9)

13.1

GDP (DBCC-Approved as of Feb. 15)Deficit Financing Mix (%)

ForeignDomestic

Debt to GDP Ratio (%)

10,673.9

14.0**86.0**

50.2***

11,899.3

14.086.048.0

13,307.3

19.081.046.2

Notes: *A positive growth rate indicates an improvement in the fiscal balance**Actual as of Nov 2012 ***Actual as of Oct 2012

Source: DBM NBM116 & BESF 2014 based on DBM, DOF, and NEDA data

Fiscal Program


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Sources of Revenue

Sources of Tax Revenues, FY 2014

*Includes new measure for BIR Sin Tax Reforms 2012Source: FY 2014 BESF, primarily from the Department of Finance

Revenue Program

Amount (in million pesos)

Net Income Taxes853,200

Tax on Property5,291

Taxes on Domestic Goods and Services 613,331

Taxes in International Trade and Transactions408,096

Total1,879,918

Amount (in million pesos) Growth rate (%)

2012 2013 2014 2012-2013 2013-2014

Tax Revenues 1,361,073 1,607,870 1,879,918 18.13 16.92

Non-tax Revenues 165,511 135,987 136,133 (17.84) 0.11

Privatization 8,348 2,000 2,000 (76.04) 0.0

Total 1,534,932 1,745,857 2,018,051 13.74 15.59


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National Government FinancingFY 2012 to FY 2014 (in million pesos)

Particulars 2012 a/ 2013 2014

GROSS FOREIGN BORROWINGS 154,621 104,340 95,030

Net Foreign Borrowings 70,046 (3,442) 5,036

GROSS DOMESTIC BORROWINGS 798,527 630,691 620,011

Net Domestic Borrowings 468,126 303,288 269,074NET FINANCING 538,172 299,846 274,110

TOTAL NET FINANCING REQUIREMENT 242,827 238,028 266,247

a/ Based on actual data reported in the Cash Operations Report (COR)Source: FY 2014 BESF, primarily from the Bureau of the Treasury

Debt trap. While government is planning to borrow a total ofP715.041 Billion, it will only receive P274.110 Billion for bothpeso and foreign borrowings due to costs of borrowing andother charges.


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Debt Servicing in the P2.268 T budgetdoes not reflect Principal Amortization

NG Debt Service Expenditures

(in million pesos)2012 2013 2014

Interest Payments 312,800 332,209 352,652

Domestic 201,215 227,613 248,396

Foreign 115,585 104,597 104,256

Principal Amortization 416,974 435,185 440,931

Domestic 330,401 327,403 350,937

Foreign 86,573 107,782 89,994

GRAND TOTAL 729,774 767,394 793,583

Source: FY 2014 BESF, primarily from the Bureau of the Treasury


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Expenditure Program

Comparative Figures of 2012 and 2013 General Appropriations

and the 2014 proposed budget (in billion pesos)

Sources: General Appropriations Act 2012 & 2013; National Expenditure Program (NEP): DBM, 2014;and BESF: DBM, 2014

* Section 1 of the draft General Appropriations Act clearly appropriates onlyPhP1,471,970,825,000 and does not include the PhP139,903,759,000unprogrammed funds. Which is the correct number for the "New GeneralAppropriations"? PhP1.612 trillion as claimed by NEP or PhP1.472 trillion as providedfor in the draft General Appropriations Act?


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Source: Budget of Expenditure and Sources of Financing: DBM, 20112-2014

Note: Net Lending amounts to PhP27.42B in 2012, PhP26.5B in 2013 and PhP24.95B for2014. This is equivalent to percentage distribution of 1.5%, 1.32% and 1.1% inexpenditure program by sector respectively.

Allocation by Sector


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(In

Billionso

fPesos)

*Are Personal Services understated?


Allocation By General Expense Class


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Allocation by Region



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Where are the poor?The 16 poorest provinces

Province 2012

PovertyIncidence (%)

Island

Region

Lanao delSur

68.9 Mindanao

Apayao 59.8 Luzon

EasternSamar

59.4 Visayas

Maguindanao

57.8 Mindanao

Zamboangadel Norte

50.3 Mindanao

Davao

Oriental

48 Mindanao

Ifugao 47.5 Luzon

Sarangani 46.5 Mindanao

NegrosOriental

45.3 Visayas


*10 of the 16 poorest provinces

are situated in Mindanao

Province 2012

PovertyIncidence (%)

Island

Region

Masbate 44.2 Luzon

NorthCotabato

43.9 Mindanao

NorthernSamar

43.7 Visayas

Bukidnon 43.3 Mindanao

Lanao delNorte

42.5 Mindanao

SultanKudarat

41.6 Mindanao

CotabatoCity

41.5 Mindanao


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Most Dramatic Rise in Poverty Levels


Province 2009

(%)

2012

(%)

Luzon

Apayao 43.9 59.8

Ifugao 28.7 47.5

Visayas

EasternSamar

46.7 59.4

Mindanao

Bukidnon 38.8 43.3

Cotabato City 24.5 41.5

Lanao del Sur 51.4 68.9

Maguindanao 37.6 57.8

NorthCotabato

24.4 43.9


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Top 12 Agencies, FY 2012-2014Dept. FY 2012 GAA

(000)

Ra

nk

FY 2013 GAA

(000)

Ra

nk

FY 2014Proposed

(000)

Ra

nk

DepEd 201,821,472 1 232,595,221 1 281,751,791 1

DPWH 109,833,405 2 155,517,533 2 200,265,553 2

DILG 92,879,820 4 91,164,442 3 99,595,064 3

DND 106,905,022 3 80,420,311 4 82,195,121 4

DOH 42,769,378 7 51,074,586 7 80,807,312 5

DSWD 48,722,175 6 56,333,858 6 78,876,694 6

DA 52,932,023 5 64,474,099 5 69,473,867 7

DOTC 33,242,378 8 34,185,121 8 45,161,306 8SUCs 22,097,645 9 32,770,703 9 34,650,625 9

DENR 16,990,968 11 23,135,850 10 23,359,611 10

DAR 17,903,222 10 21,038,824 11 20,002,768 11

DFA 10,912,081 13 11,613,793 13 12,113,738 12

Source: GAA, 2012-2013; NEP: DBM, 2014


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Comparison of Agency Budget,SPFs, Unprogrammed Funds and

Automatic Appropriations

Budgets for Departments/Agencies account for aroundone-half of the budget.

Source: GAA 2012 & 2013; NEP & BESF: DBM, 2014


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Proposed Special Purpose Funds for 2014SPECIAL PURPOSE FUNDS GAA 2012 GAA 2013 2014 Proposed

Budgetary Support to

Government Corporations

21,576,603,000 44,664,500,000 46,696,697,000

Allocation to LocalGovernment Units

18,303,490,000 17,529,452,000 19,705,022,000

Calamity Fund 7,500,000,000 7,500,000,000 7,500,000,000

Contingent Fund 1,000,000,000 1,000,000,000 1,000,000,000

DepEd School BuildingProgram

1,000,000,000 1,000,000,000 1,000,000,000

E-Government Fund 1,000,000,000 1,000,000,000 2,478,900,000

International CommitmentsFund

2,683,248,000 2,636,723,000 4,815,644,000

Miscellaneous PersonnelBenefits Fund

109,296,738,000 69,089,206,000 80,713,614,000

Pension and Gratuity Fund(formerly RetirementBenefits Fund)

34,437,891,000 98,715,143,000 120,495,952,000

Source: GAA 2012 & 2013; National Expenditure Program: DBM, 2014


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Proposed Special Purpose Funds for 2014

1 The PhP22.4 Billion Priority Social and Economic Projects Fund proposed in the 2013 NationalExpenditure Program was later realigned to concerned agencies as a result of the campaign of ABI forthe 2013 Budget.2 Tax Expenditures Fund of PhP26.9 Billion was NOT a budget item appropriated in the 2013 GAA but

placed under the SPFs for 2013. However, this was only indicated in the 2014 Proposed Budget.3 Inclusive of PhP2.072 Million Retirement and Life Insurance Premium

SPECIAL PURPOSEFUNDS

GAA 2012 GAA 2013 2014 Proposed

PriorityDevelopmentAssistance Fund

24,890,000,000 24,790,000,000 25,240,000,000

PAMANA Fund 1,764,300,000 - -

Priority Social andEconomic Projects

Fund1

Feasibility StudiesFund

- - 400,000,000

Tax ExpendituresFund2

TOTAL 223,452,270,000 267,925,024,000 310,047,901,0003


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UNPROGRAMMEDFUNDS


Budgetary Support toGOCCs (Recording ofRelent Loans in the 2014NEP)

25,214,549,000 16,826,406,000 36,268,000

Support to Foreign-

Assisted Projects

1,224,790,000 2,226,655,000 16,124,491,000

General FundAdjustments

1,000,000,000 1,000,000,000 1,000,000,000

Support for InfrastructureProjects and Social

Programs

26,000,000,000 23,000,000,000 56,349,000,000

Disaster Risk Reductionand Management

14,200,000,000 - -

Debt ManagementProgram

85,182,506,000 60,363,130,000 25,000,000,000


Proposed Unprogrammed Funds for 2014


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UNPROGRAMMEDFUNDS


AFP ModernizationProgram

- 10,632,180,000 10,894,000,000

Risk ManagementProgram

- - 30,000,000,000

Payment of TotalAdministrative DisabilityPension

- 3,000,000,000 -

Peoples Survival Fund - 500,000,000 500,000,000

TOTAL 152,821,845,000 117,548,371,000 139,903,759,000*


Proposed Unprogrammed Funds for 2014

* Details of the proposed amount for Unprogrammed Fund (UF) are not completelydisclosed in 2014 National Expenditure Program. Special provisions would only identifyDebt Management Program, Recording of Relent Loans and Risk Management Program.The complete listing of line items are instead indicated in the Details of SelectedPrograms/Projects for 2014.


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AUTOMATICAPPROPRIATIONS


Interest Payments for DebtService

333,107,000,000 333,902,000,000 352,652,000,000

Internal Revenue Allotment 273,309,592,000 302,304,001,000 341,545,000,000

Tax Refunds 9,969,209,000 15,518,556,000 -

Pension under RA 2087 &

5059

331,000 331,000 -

Grant Proceeds 1,094,084,000 545,844,000 -

Custom duties and taxes,including Tax expenditures

33,043,000,000 26,900,000,000 26,900,000,000

Net Lending 23,000,000,000 26,500,000,000 24,950,000,000

Employees retirement and

life insurance premiums

23,270,917,000 28,125,611,000 28.9 billion

Rewards and IncentivesFund

- 2,182,808,000 -

Special accounts in thegeneral fund

26,834,442,000 19,240,064,000 21.1 billion

TOTAL 723,628,575,000 755,219,215,000 796,047,000,000


Proposed Automatic Appropriationsfor 2014


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Issues on Special Purpose Funds, AutomaticAppropriations and Unprogrammed Funds

Lump sum appropriations have always beenproblematic

since these are not as detailed as regular appropriations,they tend to be vulnerable to abuse.

accountability is sometimes difficult to establish anddocumentation difficult

in the Philippines, lump sum appropriations includespecial purpose funds, overall savings andunprogrammed funds


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2009 COA Report on the SPFs

In August 12, 2009 Audit Briefing for the Office ofthe House Speaker, COA reported that:

a. the DBM failed to submit to COA authority fromthe Executive to transfer regular appropriation to

Special Purpose Fund

b. allotments exceeded appropriations for someSpecial Purpose Funds

c. pooled savings for 2007- Ph106.11 billion (net oftransfer from one agency to another and from oneSpecial Purpose Fund to another cannot be verifieddue to lack of supporting documents


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2009 COA Report (cont.)

d. SAROs issued to DPWH chargeable to PDAF, aspecial purpose fund, contain appropriation codefor regular programs/projects

e. regular appropriations of Ph554.06 million ofthe Department of Agriculture were transferred toFisheries Modernization Program Fund but DBM didnot submit the authority of the Executive to makesuch a transfer

f. allotments in 2008 exceeded appropriations insome SPF by Ph2.61 billion


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2010 COA Report

In its 2010 Annual Audit Report of theDepartment of Budget and Management, theCommission on Audit recommended that:

DBM refrain from transferring one lump-

sum fund/special purpose fund (SPF) toanother, or utilizing the appropriation ofone Fund for purposes of another Fund,

otherwise , the in tent ions o f theappropriation law would be circumvented.


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Issues on Lump Sum Appropriations

the issues raised on lump sumappropriations, specially special purposefunds remain the same

these lump sum appropriations are morevulnerable considering the huge amountsinvolved

the practices identified in 2008 have notchanged at all


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More Transparency!

There is a need for the public to scrutinizethe other side of the budget: the SpecialPurpose Funds and Unprogrammed Funds.

Some Findings on


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Some Findings onCCT Impact Assessment

Commissioned by DSWD and with support from the WorldBank and AusAid

No overall increase in per capita consumption amongHH beneficiaries. The estimated per capita consumptionper day was P46 in both program and non-programbarangays

Contrary to the design of the program in which themaximum benefit amount beneficiary HHs could receive is23% of poor HHs per capita income, in reality thebeneficiaries are receiving considerably smalleramounts (an average of P1,740 for the last bimonthlypayment).

Although Pantawid areas seemed to have higherestimated per capita incomes and lower povertyrates in 2011 compared to non-Pantawid areas,these differences were not significant . No significantevidence of lowered poverty rates among HH beneficiaries

50


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Local Impacts of CCT

On the increased levels of spending for theconditional cash transfers (CCT):

An Oxford PhD dissertation study have

shown the

large positive impact of the CCT programto incumbent vote shares

risks associated with strict povertytargeting.

ld i l


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Two worlds in a planet

1. The first world boasting ofa 7.8 % GDP growth andconsidered the fastestgrowing economy in Asia

2. and the other world sufferingfrom disasters, seriousproblems of hunger andrising criminality, etc.

There seems to be two worlds existing in the planet Philippines:

We in public administration are challenged tobridge the gap between these two worlds by usingthe budget as an instrumentality for reforms and

not for partisan political gain.

analysis on 2014 budget

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