Budget deficit ceiling getting 'tighter'

MANILA, Philippines - The government’s budget deficit ceiling of P250 billion for 2009 has become more difficult to achieve due to higher spending on relief efforts after typhoons hit the country, anemic revenues and the failed bidding of a big-ticket property, the country’s finance chief said late Friday.

Finance Secretary Margarito Teves said he wants to rebid the Food Terminal Inc. (FTI) property in Taguig this year or enter into a negotiated sale so that the government could immediately raise much needed revenues that would help plug the widening deficit.

“The space within which to stay within P250 billion is getting tighter so I need those revenues as soon as possible,” he said.

On Wednesday, the government failed for the third time to sell FTI after property developers snubbed the public bidding held at the government’s Privatization Management Office (PMO) in Makati.

Big-ticket players such as the Ayala Land Inc. and the Gokongweis’ Robinson’s Land Corp. expressed interest in the property but did not submit bids. The government had set a P13-billion floor price for the property.

The failed auction effectively set back the government’s efforts to raise P30 billion from privatization this year. The Finance department was counting heavily on the proceeds from the FTI sale to make up for the poor performance of the Bureau of Internal Revenue and the Bureau of Customs.

Teves said poor market conditions may have caused the bidding to fail as interested parties probably were not ready with their upfront cash payment.

As an option, Teves said that interested investors may seek the help of banks for “staple financing.”

Staple financing happens when banks provide a pre-arranged financing package to potential bidders during an acquisition.

Despite the difficult environment, Teves said the interagency Development Budget Coordination Committee has not changed the P250 billion budget deficit ceiling for 2009.

As of end-August, the budget deficit had swelled to P210 billion, only P40 billion shy of the ceiling and almost seven times more than the P31.7 billion deficit registered in the same period last year, latest data from the Finance department showed.

In August alone, the budget deficit hit P22 billion, reversing the P1.7 billion budget surplus recorded in the same month last year.