Economic Planning Secretary Felipe Medalla said that to achieve a lower deficit, soft cuts of P40 billion in the proposed P725-billion budget will be implemented for the year until its revenue-enhancement programs generate additional money for the government's near empty coffers.
Medalla explained that without the soft cuts the original target deficit this year would have been P141 billion. The cuts would be department-wide, affecting mostly capital expenditures and less critical infrastructure projects of all departments.
"It will be a mix of revenue enhancements and cuts in expenditures for government to contain the deficit," Medalla said.
Even with a lower budget of P685 billion (less P40 billion), Medalla said the government's growth targets are on track.
"Contrary to what others might say, it's not suicide. It's not going to stimulate the economy," Medalla admitted, but added, "it's not going to contract the economy either."
With the economy expected to slow down as a result of the political uncertainty arising from the impeachment trial of President Estrada, Medalla said members of the Development Budget Coordinating Council decided to revise or adjust its revenue collection targets, resulting in lower revenues.
For this year, Medalla said tax collection of the Bureau of Internal Revenue would be lower by P33 billion from the original target of P440 billion to P407 billion while proceeds from the privatization of government assets would be lower by P12 billion to P7 billion from P19 billion.
On the other hand, expenses for debt servicing will go up by P31 billion to P176 billion from the original target of P145 billion.
Medalla said government is being conservative about its targeted revenues from the sale of government-owned and controlled corporations and other assets, especially since both local and foreign investors continue to sit it out pending the results of the impeachment trial.
"We do not want to sell when the market cannot give us a good price at this time," Medalla said.
Earlier, Medalla said government is preparing for a worst-case scenario that assumes a lower budget of P685 billion from P725 billion. This means foregoing badly-needed pump-priming activities required to keep the economy afloat, especially with the absence of foreign investors.
"Pump-priming is not something that we can do," Medalla said, adding the government "is serious in reining in the deficit," which will continue to be its focus for the year. He said the P40 billion reserve will be on top of a P10-billion cut in this year's budget.