Budget deficit of P35.9B within target

The country posted a budget deficit of P35.9 billion in the first two months of the year, well within government’s expectations, and representing 69.7 percent of the first quarter’s programmed deficit of P52.93 billion, the Department of Finance (DOF) reported yesterday.

Finance Secretary Jose Isidro Camacho said the January-February figure was as expected, reflecting the government’s front loading of fiscal spending in the first half of the year to kickstart the still fragile economy.

"We want to pump-prime the economy, but we cannot do this by expanding the deficit," Camacho said, adding that "so what we are doing is merely accelerating public expenditures so that projects would start quickly and hopefully spur economic activity."

"It’s in line with their projection... they have a decent shot at their budget target for this year," said David Cohen, an economist at MMS/S&P in Singapore.

He said there was now less anxiety in financial markets about the country’s ability to meet its deficit targets after last year’s performance.

Charlie Lay, an analyst at 4CAST in Singapore said there was nothing surprising in the latest figure and it would have no real implications on the exchange rate.

On track

Administration officials said the government remained on track to meet its 2002 budget deficit target of P130 billion and would revise all its economic targets next month.

In recent years, the country’s tendency to massively overshoot deficit targets worried investors and increased debt-raising costs, but analysts saw less cause for concern given the current government’s emphasis on fiscal discipline.

"I think we are still on track to meet the (2002 year-end) target because key interest rates are lower than we had projected earlier, " DOF Assistant Secretary Gil Beltran said.

He said the government had realized savings of around P9 billion for the first three months of the year as a result of the sharp slide in 91-day Treasury bill rates, a key deficit financing instrument used by the government.

Expenditures for the first two months totaled P121.14 billion with revenue of P85.20 billion.

For February alone, the government incurred a deficit of P20.96 billion with revenues of P37.90 billion and expenditures of P58.86 billion.

In 2001, the government racked up a deficit of P147 billion, slightly over its target of P145 billion.

According to the DOF, the Bureau of Internal Revenue (BIR) accounted for P59.889 billion of total revenue while the Bureau of Customs contributed P13.719 billion and the Bureau of Treasury P3.942 billion.