Line agencies to improve cash utilization to 98%

The Arroyo administration could end up spending P12 billion more this year due to the improvement in the budget utilization of government line agencies.

Coming at a time when it can barely afford to spend on economic development, cash-starved line agencies were expected to improve their cash utilization even further from 95 percent last year to 98 percent this year.

According to Budget Secretary Emilia T. Boncodin, there would be an increase in the rate of notices for cash allocation (NCAs) this year as line agencies improve their utilization rate, especially in the use of funds for official development assistance (ODA) projects.

"This is our conservative estimate, although this may be far-fetched," she told reporters. Historically, she said agencies use up only 85 percent of their NCAs and the resulting surplus is channeled to finance unprogrammed expenses.

However, Boncodin said that the Arroyo administration’s fiscal consolidation has compelled line agencies to use up their funds more aggressively.

If the projected increase is realized, she said higher NCA utilization rate would result in a P12-billion increase in actual government expenditures.

This would cause even more problems since the government is already in a tight fiscal bind that is projected to widen the budget gap to P202 billion this year.

Last year, the government underestimated its expenditures and ended up spending more than it expected, blowing up its deficit from the programmed P130 billion to P212.7 billion by the end of the year.

"We are very careful in approving projects that we know will further burden the budget," she said. "The only good thing about this is that we have always been criticized for our low absorptive capacity. Now we know that if we release funds early, we can move these projects if only we can afford it."

Boncodin said that projects moved at record speed last year as the government front-loaded its expenditures but admitted that the fiscal program paid dearly and ended up sustaining a deficit P80 billion more than allocated.

To prevent the deficit from careening out of control, Boncodin said the government would be releasing funds on a quarterly basis and line agencies would also be required to perform an agency performance review (APR) every quarter.