PowerPoint Presentation

BUDGET DEFICIT MANAGEMENT IN THE PHILIPPINES

BUDGET DEFICIT MANAGEMENT IN THE PHILIPPINESWELCOMEPARTICIPANTS!

Budget Deficit Management: A Review of Philippine ExperienceCEM 1011:00pmGuest Speakers:Kathleen Rose BasilioJayser TanAlvean Mei Aguilar3Review of the Budget Deficit Management in the PastRevenue Patterns in the PhilippinesLocal Government CodeTax Reform ProgramTax Reforms (e.g. Value-Added Tax)Focus on Direct taxationOpenness to TradeNon-Tax RevenuesRevenue Patterns in the PhilippinesLocal Government CodeTo empower LGUs by giving them the ability to impose their own tax in their respective economies in order to have a larger share in the government revenuesRevenue Patterns in the Philippines

Table 1. Income and Expenditure of the Local Government (in million pesos) from 1980-1999Revenue Patterns in the PhilippinesTax Reform ProgramEncouraged financing projects in the public sector because of more accessible resources that the program providedAlso promotes equity, correct business incentives boosting the economic activity in the countryRevenue Patterns in the PhilippinesDirect TaxationTax structure gives the burden to those who have the ability to pay taxes moreRevenue Patterns in the PhilippinesDirect TaxationTax structure gives the burden to those who have the ability to pay taxes moreRevenue Patterns in the PhilippinesOpenness to TradeLess depended country in terms of Trade TaxesRevenue Patterns in the PhilippinesOpenness to TradeLess depended country in terms of Trade TaxesLowered tariff wallsRevenue Patterns in the PhilippinesNon-tax RevenuesE.g. privatization of government assets (take note the non-recurrence of this type of revenue)Spending Patterns in the PhilippinesCapital Spending in the PastPayment of LiabilitiesSpending Patterns in the PhilippinesCapital Spending80s large share of the budget was spent on capital spending90s government spent less on physical infrastructureSpending Patterns in the PhilippinesPayment of LiabilitiesHuge chunk was allocated to payment of liabilities, interest paymentsDebt Financing in the PhilippinesForeign BorrowingDomestic BorrowingDebt Financing in the PhilippinesForeign BorrowingNumerous public investments financed through foreign borrowing in the late 90sDebt Financing in the PhilippinesNumerous public investments financed through foreign borrowing in the late 90sDebt Financing in the Philippines

Table 2. National Government Account Balances (in million pesos) from 1988-2000Current Status of Budget Deficit in the Philippines2014 budget deficit reduced drastically by 73%, from Php 266.2 billion to Php 73.1 billion. The deficit shrank due to reduced spending on public expenditure of Php 1.98 trillion, which is 13% below target Current Status of Budget Deficit in the Philippines

Table 3. Planned and Actual Government Spending 2014Current Status of Budget Deficit in the PhilippinesTribune Daily (April 13, 2015) reported that early signs of decreasing economic growth is apparent. Foreign Direct Investments have slowed down significantly in February this year. Is there a need for change?Is there a need for change?Underspending of the government as a way to reduce budget deficit is not permissible for a country that is still on its path towards a growing economy. It hampers the countrys opportunity to benefit from sound macroeconomic environment. Is there a need for change?Underspending of the government as a way to reduce budget deficit is not permissible for a country that is still on its path towards a growing economy. It hampers the countrys opportunity to benefit from sound macroeconomic environment. Therefore, underspending of the government as a way to reduce budget deficit is not permissible for a country that is still on its path towards a growing economy. It hampers the countrys opportunity to benefit from sound macroeconomic environment.

Alternative # 1:Creation of CurrencyUsed to increase the money supply in the country.Alternative # 2:Domestic BorrowingDomestic borrowing is another way to finance budget deficit in which government debt is voluntarily held by the banks or the public for the interest it pays. It is done through acquiring funds from sources within the country. Usually, it involves auction of treasury bills, notes and bonds to the public. Alternative # 3:Foreign BorrowingThe government would borrow from outside-the-country sources or foreign sectors like ADB, IBERD, OECF, etc. These include securing loans from foreign financial institutions and floating government securities in the international market. Alternative # 4:Reserve RequirementMinimum amount of cash or cash-equivalents that banks and other depository institutions are required by law to keep on hand and which may not be used for lending or investing. Alternative # 5:Retain the Cut Spending PolicyBest Alternative:Combination of PoliciesFirst is efficient spending, by efficient we mean less spending but not sacrificing the necessary human and capital investment.

Second, efficient government revenue through tax collection

Third, domestic borrowing.Implementation Plan:

BUDGET DEFICIT MANAGEMENT IN THE PHILIPPINESTHANK YOU FORLISTENING!