Government spares foreign-assisted projects from budget cuts

Foreign-assisted projects (FAPs) could be the country’s only source of critical development funds as the Arroyo administration assured its foreign donors that their projects would be protected from the budget cuts now being instituted to contain the swelling budget deficit.

The National Economic and Development Authority (NEDA) said it would protect foreign-assisted projects from the budget cuts and stay within the government’s commitment to provide counterpart financing for the projects covered by official development assistance (ODA).

NEDA Director General Dante Canlas said the government had little choice anyway since these projects were covered by agreements that the government could not renege on, specifically where it concerns counterpart funding.

Canlas admitted that "procedural delays" often cause problems for the release of ODA funds but he insisted this was not from the government’s lack of enthusiasm to provide counterpart funding.

Under most ODA agreements, funding agencies agree to provide the bulk of the funding required by specific projects, but the government has to commit to provide counterpart funding, however minimal, to ensure that the sovereign would have a stake in the undertaking.

Now, with all indications pointing to the possibility that the government would miss its 2002 budget deficit target, Canlas said foreign-assisted projects would be protected from cuts "as a matter of course."

The World Bank (WB) was one of the first multilateral agencies to raise concerns over the government’s decision to cut expenditures in order to contain its deficit problem that stemmed from the dismal performance of its revenue-collecting agencies.

WB country director Robert Vance Pulley said there has been a significant increase in counterpart funding for foreign assisted projects but the Bank needed assurance that these projects would not be shelved in the process of trimming down the budget for the rest of the year and on to next year.

"Despite commitments by the government, there are always leeways and a project could find itself in need of counterpart funding unless there are explicit allocations from Congress," Pulley explained.

With very little funding coming from the government coffers, however, ODA funds have suddenly become even more attractive. Canlas said projects that were merely chugging along are suddenly demonstrating increased utilization rates.

Pulley confirmed this and said the WB would increase its disbursement, although the project utilization and efficiency would have to be evaluated to determine if the projects were being effective based on their original intentions.

The NEDA, together with foreign donors, conduct an annual ODA review where fund utilization, progress and cost overruns are the primary concerns. This year’s ODA review, however, will not be concluded until the next few weeks.

Budget Secretary Emilia Boncodin said earlier that the utilization rate of ODA funds actually increased by 68 percent this year, indicating that there has been a massive drawdown of foreign assistance and a corresponding increase in the utilization of counterpart funds.